Most Asian equities advanced, with Japan’s Topix benchmark climbing to its highest since 1990 on optimism the world’s third-largest economy will outperform peers.
(Bloomberg) — Most Asian equities advanced, with Japan’s Topix benchmark climbing to its highest since 1990 on optimism the world’s third-largest economy will outperform peers.
A renewed push by Japan’s corporates to increase buybacks and focus on returns is helping boost sentiment, with the Nikkei 225 Stock Average leading gains among Asia’s major benchmarks in 2023. Chinese equities on the mainland slipped on worst-than-expected economic data, with analysts forecasting more policy support later this year.
“Domestic and foreign investors are positive about Japan relative to the US and Europe, as it does not face an imminent recession and yet has very low valuations,” said John Vail, chief global strategist at Nikko Asset Management Co. “There is a strong possibility that it will outperform global markets.”
Contracts for the S&P 500 and the Nasdaq 100 slipped ahead of scheduled debt-ceiling talks later Tuesday between President Joe Biden and House Speaker Kevin McCarthy. Treasury Secretary Janet Yellen warned that the US is already paying a price for its failure to raise the federal debt limit and reiterated her department may run out of cash as soon as June 1.
A gauge of dollar strength was little changed and Treasuries edged higher, with the yield on the two-year bond declining two basis points to just below 4%.
“We’re all hoping, I guess expecting, that ultimately they get there because the default would be extremely inconvenient for risk markets and frankly the economy more broadly,” Ben Powell, chief investment strategist for Asia Pacific at BlackRock Investment Institute, said on the debt talks on Bloomberg Television. “Time is very, very tight today.”
Chinese stocks fell in Shanghai and Shenzhen after official data showed industrial output, retail sales and fixed investment all missed estimates in April.
“This set of data confirm what the credit data/imports/inflation numbers suggest all along — that domestic demand is weak, further monetary policy easing is required at some point and that the yuan could remain under pressure,” said Fiona Lim, senior FX strategist at Malayan Banking Bhd. in Singapore.
Stocks in Hong Kong though were lifted by filings showing more bullish bets by Michael Burry on e-commerce giants JD.com Inc. and Alibaba Group Holding Ltd. The Nasdaq Golden Dragon China Index had rallied by more than 4% on Monday.
South Korean equities also gained, supported by chip stocks on the potential merger between Kioxia Holdings Corp. and Western Digital Corp. Taiwan Semiconductor Manufacturing Co. led gains on the island’s benchmark following filings that showed hedge funds Tiger Global Management and Coatue Management adding positions.
The Aussie weakened after the China data. Reserve Bank of Australia minutes showed officials weighed the risk of upside surprises to inflation amid a tight labor market in their surprise decision to hike rates this month.
More Volatility
UBS Private Wealth Management expects to see more volatility in the markets, especially on the short-end of the Treasury curve, as deadline approaches on the debt-ceiling dispute. “If you’re someone who has cash on the sideline, right now we are recommending that you go ahead and you lock in those improved bond yields,” financial adviser Sarah Ponczek said on Bloomberg Television.
This week’s US data will likely underscore more economic weakness, emboldening the Federal Reserve’s dovish voices even though inflation has failed to reassure, according to Anna Wong at Bloomberg Economics.
JPMorgan Chase & Co.’s Marko Kolanovic joined a chorus of Wall Street strategists Monday in warning that the US debt-ceiling impasse is yet another headwind threatening the outlook for equity markets. Morgan Stanley’s Mike Wilson delivered a similar warning on the debt-ceiling deadline, noting the bank’s clients said the issue is unlikely to be resolved without some near-term volatility.
Elsewhere, oil climbed and gold was little changed.
Key events this week:
- Eurozone GDP, Tuesday
- US retail sales, industrial production, business inventories, Tuesday
- Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
- Eurozone CPI, Wednesday
- BOE Governor Andrew Bailey delivers keynote speech, Wednesday
- US housing starts, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 6:25 a.m. London time. The S&P 500 rose 0.3% Monday
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 0.6%
- Euro Stoxx 50 futures were little changed
- Japan’s Topix index rose 0.4%
- Hong Kong’s Hang Seng Index was little changed
- China’s Shanghai Composite Index fell 0.1%
- Australia’s S&P/ASX 200 Index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0878
- The Japanese yen was little changed at 135.99 per dollar
- The offshore yuan fell 0.1% to 6.9693 per dollar
- The Australian dollar fell 0.2% to $0.6684
- The British pound was little changed at $1.2520
Cryptocurrencies
- Bitcoin fell 0.8% to $27,129.18
- Ether fell 0.7% to $1,813.67
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.48%
- Japan’s 10-year yield declined 0.5 basis point to 0.4%
- Australia’s 10-year yield advanced one basis point to 3.44%
Commodities
- West Texas Intermediate crude rose 0.3% to $71.31 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott, Winnie Hsu, Aya Wagatsuma and Chester Yung.
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