Chinese stocks declined, a sign that traders are increasingly pricing in the lack of major stimulus from the government. Equity markets in the rest of Asia climbed, pacing US gains.
(Bloomberg) — Chinese stocks declined, a sign that traders are increasingly pricing in the lack of major stimulus from the government. Equity markets in the rest of Asia climbed, pacing US gains.
Shares in Hong Kong and mainland China were the worst performers in the region and forced a gauge of Asian shares to erase earlier gains. The offshore yuan also fell to the weakest level in a week.
Investors see no easy fix to China’s economic slump, with fresh signs of financial stress among the nation’s dollar-bond issuers. Economists say Beijing’s plan to boost consumption still lacks steps to meaningfully bolster the recovery and are shifting their focus to potential measures from the Politburo meeting later this month.
“The market pessimism around Chinese equities is probably at a level of extreme,” John Lin, chief investment officer of China equities at AllianceBernstein, said on Bloomberg Television. “At this point, little policies probably aren’t enough. You need something bigger, something to sort of shock people out of the slumber.”
Benchmark indexes were higher in Japan and Australia, while contracts for US equities were flat.
In the currency market, the yen weakened for a second day following Bank of Japan Governor Kazuo Ueda’s comment that it would maintain monetary easing unless there is a shift in its price goal view.
Despite the yen’s weakness, the BOJ is unlikely to alter its monetary policy in next week’s meeting, said Shoki Omori, chief desk strategist at Mizuho Securities. Ueda will probably stick to his stance focusing on forward guidance and will not change major policy without guiding markets, he added.
Markets in the US closed near session highs on Tuesday, as results from Bank of America Corp. and Morgan Stanley bolstered bank shares and a rally in equities linked to artificial intelligence resumed. Both the S&P 500 and the tech-heavy Nasdaq 100 rose for a second day, while the blue-chip Dow Jones Industrial Average outperformed, up more than 1% for a seventh day of gains, its longest winning streak in more than two years.
A gauge of dollar strength ticked higher and Treasury yields slightly declined. Treasuries ended mixed Tuesday, with the yield on the policy-sensitive two-year note rising and the 10-year benchmark’s rate falling. In the swaps market, traders fully priced in a quarter-point hike at next week’s Federal Reserve meeting. European bonds gained after European Central Bank Governing Council member Klaas Knot said monetary tightening beyond next week’s meeting is anything but guaranteed.
Recent data suggest that central banks are inching closer to their peak monetary tightening, according to Robert Mead, head of Australia and co-head of Asia Pacific portfolio management at Pacific Investment Management Co. “Depending on the jurisdiction, we’re close,” he said on Bloomberg Television. “Bonds are now exciting. Once again, they’ve become sort of attractive for investors and there’s lots of action.”
US data showed industrial production and retail sales missed estimates, though an underlying measure of household spending pointed to a more resilient consumer.
On the earnings front, Bank of America delivered a surprise gain from its core Wall Street businesses and Morgan Stanley executives pointed to an improved outlook. Goldman Sachs Group Inc. is scheduled to report Wednesday.
In tech, Microsoft Corp. advanced 4% after providing details on pricing for some artificial-intelligence services. Netflix Inc. and Tesla Inc. are slated to release results Wednesday.
“With US economic growth still robust in Q2 and the US dollar weakening modestly further,” earnings estimates could again prove conservative this quarter “and we could see companies deliver material earnings beats, on average,” strategists at JPMorgan Chase & Co., including Daniel Motoc and Bram Kaplan, wrote in a note.
Elsewhere, oil edged lower after rising more than 2% in the previous session on signs Russia is making good on its pledge to curb supplies. Gold hovered around the highest level since May.
Key events this week:
- Eurozone, UK CPI, Wednesday
- US housing starts, Wednesday
- China loan prime rates, Thursday
- US initial jobless claims, existing home sales, Conf. Board leading index, Thursday
- Japan CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 12:43 p.m. Tokyo time. The S&P 500 rose 0.7%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 0.8%
- Japan’s Topix rose 0.6%
- Australia’s S&P/ASX 200 rose 0.4%
- Hong Kong’s Hang Seng fell 1.3%
- The Shanghai Composite fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.1226
- The Japanese yen fell 0.3% to 139.18 per dollar
- The offshore yuan fell 0.3% to 7.2138 per dollar
- The Australian dollar fell 0.4% to $0.6787
Cryptocurrencies
- Bitcoin rose 0.8% to $30,025.86
- Ether rose 0.8% to $1,910.68
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.76%
- Australia’s 10-year yield declined eight basis points to 3.90%
Commodities
- West Texas Intermediate crude fell 0.4% to $75.41 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Joanna Ossinger, Yumi Teso and Stephen Kirkland.
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