Global Stocks Surge on Pavlovian Response to Expectations for 'Stimulus'! Shanghai Index and Nikkei 225 Lead Asia

Last night, US and Europe's stocks soared.

Stated reason? Stimulus addicts seem to drool over Monday's China's bank reserve ratio cuts and the prospects of more rescue efforts by central banks/governments ahead.

From Bloomberg   (bold mine)

U.S. stocks rallied to a seven-week high after data indicated manufacturing in the world’s largest economy may be stabilizing, while optimism that central banks from Asia to Europe will add to stimulus supported emerging-market currencies and commodities.

The Dow Jones Industrial Average surged more than 340 points, while the Standard & Poor’s 500 Index rebounded from a two-day drop, climbing back to a level last seen at the start of the year. A gauge of emerging-market shares advanced the most since Feb. 15 as the ruble and Brazil’s real strengthened. Yields on 10-year Treasury notes jumped nine basis points to 1.83 percent, while gold fell following its steepest monthly rally since 2012. Crude topped $34 a barrel in New York, while the yen pared back some gains.

The surge in US-European stocks spilled over to Asia

Aside from PBoC's RRR cut, top Chinese politicians comprising the National People's Congress and the Chinese People's Political Consultative Conference, will be having their two week 13th Five-Year Plan beginning tomorrow. So my guess is that their government had to make a welcoming committee via a surge in stocks.

Nonetheless, from another Bloomberg report (bold mine)

China’s stocks rallied the most since November, led by property companies and commodity producers, on speculation the government will announce measures to boost growth at legislative meetings this week.

The Shanghai Composite Index climbed 4.3 percent, as a gauge of real estate companies surged 5.6 percent. The yuan weakened offshore after Moody’s Investors Service reduced its credit-rating outlook on the nation to negative. The Hang Seng China Enterprises Index advanced the most in two weeks.

Pressure is building on the government to follow up on Monday’s cut in lenders’ reserve-requirement ratios with more stimulus after data this week showed a deterioration in manufacturing. The National People’s Congress, where delegates will sign off on a new five-year economic plan, begins on March 5. The economic slowdown has been a trigger for the Shanghai Composite’s 23 percent slump this year through Tuesday, the worst performance among 93 global equity indexes.

See bad news is GOOD news. As stocks should again be a focus of "subsidies" or "bailouts". 

Of course it has not just stocks, all those previous "easing" by Chinese authorities has reignited the property bubble where Shenzhen's property prices soared by a whopping 50%!!! 

From Bloomberg: (bold added)

After getting burned by the bursting of China’s stock-market bubble, Liu Yihui is seeking salvation from the country’s latest investment mania: big-city properties.

The 35-year-old civil engineer dumped his equity holdings after losing 40 percent last year, using the proceeds to buy a 5 million yuan ($763,464) apartment in Shenzhen. Prices in the southern business hub have surged more than 50 percent over the past year, the fastest pace since at least 2011....

In Shanghai, lines of prospective buyers outside property agents’ offices clogged roads and forced police in the suburban Baoshan district to curb traffic as they sought to maintain order, Caixin reported Monday. The frenzy prompted China’s official Xinhua News Agency to warn against “panic” buying, while Shanghai’s government issued a call for calm on its official Weibo microblog account.

In the HOPE to stave off a hard landing, the Chinese government continues to solve its bubble problem by inflating more bubbles! More signs that the Chinese political economy have been mired deeper into a debt trap

Yet the Pavlovian response to stimulus has likewise afflicted Japan's stocks

From another Bloomberg report

Japanese stocks jumped to the highest closing level in a month, adding to a global rebound in equities, as the yen weakened and U.S. data indicated manufacturing in the world’s largest economy may be stabilizing

The Topix index jumped 3.8 percent to 1,349.61 in Tokyo, with all of its 33 industry groups rising. The Nikkei 225 Stock Average added 4.1 percent to 16,746.55, with both measures closing at the highest level since Feb. 8. The yen traded at 113.92 per dollar after dropping 1.1 percent on Tuesday...

China said Monday it would reduce the amount of cash lenders must lock away in a bid to cushion a slowdown there. Manufacturing data trailed estimates Tuesday, reinforcing concern about the health of Asia’s largest economy.

While February marked a fourth consecutive monthly slide for global stocks, signs that financial tension in China and a slump in commodities are abating has seen shares recover more than 7 percent from a 2 1/2-year low on Feb. 11. Data suggesting that American consumers can still power the world’s largest economy and hints from central banks in Asia and Europe that more stimulus is at the ready underpinned the revival.

And part of the "stimulus" speculation story has been for the  the world’s biggest retirement fund Japan's Government Pension Investment Fund to probably add stocks to their portfolio. Yes this means to put more of the resources of the aging Japanese into bigger trouble! 

With today's 4.1% jump by the Nikkei 225,  which adds to mid February's 7.2% surge, volatility in Japanese stocks continue to build. And volatility of such proportion has last been seen in 1990-1992. 

Interesting developments.