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Introduction
(Bloomberg) — Equities in Asia rose Monday following a rally on Wall Street as investors embraced fresh signs that inflation is easing further. Chinese stock gauges led gains on expectations of more government stimulus.
Key Points
- Equities in Asia rise on easing inflation concerns
- Chinese stock gauges lead gains on expectations of government stimulus
- Japanese and Korean shares also increase
- Gains for Chinese equities push MSCI Emerging Markets Index higher
- US equity futures and European stock contracts fall in Asia
Investor Confidence
The demand for risk assets comes after further easing in key US inflation gauges, signaling fresh optimism that a soft landing for the world’s biggest economy is within reach. Federal Reserve Bank of Minneapolis President Neel Kashkari described the inflation outlook as “quite positive,” despite the likelihood of job losses and slower growth.
Bank of Japan Action
The Bank of Japan announced unscheduled bond-purchase operations to buy debt, seeking to contain a selloff after it said Friday it will allow yields to rise above a 0.5% cap. The yen swung to a loss against the dollar.
July manufacturing PMI data for China remained in contraction but beat estimates. More government efforts to shore up the economy emerged on Friday, including a plan to boost consumer industries and steps to grow an exchange dedicated to helping small firms get access to funds.
Chinese Stock Market Rally
Chinese stocks rose from Monday’s open, extending last week’s gains. The CSI 300 Index climbed as much as 1.8%, taking its monthly gains to 5.8%, the most since January. The Hang Seng China Enterprises Index, which tracks mainland stocks listed in Hong Kong, rose by over 3%.
“The government’s stance has clearly turned more supportive,” said Vey-Sern Ling, managing director at Union Bancaire Privee. There is more confidence that China will back up stimulus talk with concrete measures, he added.
Implications for Currency and Bond Markets
Currency and bond markets face the risk of continued volatility as investors weigh whether rate hikes from the Federal Reserve and European Central Bank last week mark the end of their tightening cycles.
Key Events This Week
- Australia RBA rate decision, Tuesday
- Eurozone S&P Global Eurozone Manufacturing PMI, unemployment, Tuesday
- UK S&P Global/CIPS UK Manufacturing PMI, Tuesday
- US construction spending, ISM Manufacturing, job openings, light vehicle sales, Tuesday
- China Caixin Services PMI, Thursday
- Eurozone S&P Global Eurozone Services PMI, PPI, Thursday
- UK BOE rate decision, Thursday
- US initial jobless claims, productivity, factory orders, ISM Services, Thursday
- Eurozone retail sales, Friday
- US unemployment rate, non-farm payrolls, Friday
Market Movements
Stocks:
- S&P 500 futures fell 0.1% as of 6:44 a.m. London time. The S&P 500 rose 1% Friday
- Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 1.8%
- Japan’s Topix rose 1.3%
- Australia’s S&P/ASX 200 fell 0.1%
- Hong Kong’s Hang Seng rose 1.3%
- The Shanghai Composite rose 0.4%
- Euro Stoxx 50 futures fell 0.4%
Currencies:
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.1007
- The Japanese yen fell 0.5% to 141.88 per dollar
- The offshore yuan was little changed at 7.1483 per dollar
- The Australian dollar rose 0.5% to $0.6680
- The British pound was little changed at $1.2845
Cryptocurrencies:
- Bitcoin rose 0.4% to $29,397.55
- Ether was little changed at $1,864.44
Bonds:
- The yield on 10-year Treasuries advanced four basis points to 3.99%
- Japan’s 10-year yield advanced 6.5 basis points to 0.605%
- Australia’s 10-year yield declined two basis points to 4.05%
Commodities:
- West Texas Intermediate crude fell 0.4% to $80.27 a barrel
- Spot gold fell 0.3% to $1,954.08 an ounce
Conclusion
The rally in Asian equities on easing inflation concerns and expectations of government stimulus in China has boosted investor confidence. However, currency and bond markets face continued volatility as rate hikes from the Federal Reserve and European Central Bank are analyzed. The week ahead will see key events and data releases that could further impact market movements.
This story was produced with the assistance of Bloomberg Automation.
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