Asia Shares Primed for Gains on China, Fed Outlook: Markets Wrap

Asian equity futures pointed to gains across the region Wednesday as China’s largest banks reportedly prepare to cut interest rates and investors speculate that the Federal Reserve is nearing the end of its tightening campaign.

(Bloomberg) — Asian equity futures pointed to gains across the region Wednesday as China’s largest banks reportedly prepare to cut interest rates and investors speculate that the Federal Reserve is nearing the end of its tightening campaign.

US shares climbed the most since June and bond yields retreated after job openings fell by more than expected, offering fresh evidence that labor demand is slowing in the world’s largest economy, taking pressure off the Fed. Separate data showed consumer confidence dropped amid souring views on jobs, higher borrowing costs and lingering inflation.

Contracts for stocks benchmarks in Japan and Australia climbed about 0.7% while those for Hong Kong advanced more than 1%, boosted by news that Chinese state-owned lenders will reduce rates on the majority of the nation’s outstanding mortgages. A gauge of US-listed Chinese companies jumped 3.7%, shaking off continued signs of financial stress in the Asian nation’s property sector.

The US economic data triggered lower wagers in swap contracts for a Fed hike in 2023, and a greater chance of a policy pivot in the first half of 2024. Traders also brought forward bets on the expected start of rate cuts to June from July of next year.

“The Fed can most likely keep rates unchanged in September,” said Jeffrey Roach, chief economist at LPL Financial. “Investors should expect a softening labor report this Friday, further cementing the thesis that the Fed is getting close to finishing its tightening cycle.”

Nearly 90% of the S&P 500 companies rose as the gauge closed just shy of 4,500. A rally in megacaps like Tesla Inc. and Nvidia Corp. sent the Nasdaq 100 up more than 2%. 

Treasury two-year yields sank 15 basis points to just below 4.9%. Yields on two-year and three-year government bonds in Australia and new Zealand fell five basis points Wednesday.

Major currencies steadied in Asia trading after a gauge of dollar strength slid Tuesday and the yen appreciated for the first time in four days.

The crypto space saw gains across the board as a US court ruling paved the way for the first Bitcoin exchange-traded fund. The world’s largest digital token jumped about 6%, Coinbase Global Inc. led the industry’s shares higher while the Grayscale Bitcoin Trust soared 17%.

Key events this week:

  • Eurozone economic confidence, consumer confidence, Wednesday
  • US GDP, wholesale inventories, pending home sales, Wednesday
  • China manufacturing PMI, non-manufacturing PMI, Thursday
  • Japan industrial production, retail sales, Thursday
  • Eurozone CPI, unemployment, Thursday
  • ECB publishes account of July monetary policy meeting, Thursday
  • US personal spending and income, initial jobless claims, Thursday
  • China Caixin manufacturing PMI, Friday
  • Eurozone S&P Global Eurozone Manufacturing PMI, Friday
  • South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
  • Boston Fed President Susan Collins speaks at virtual event, Friday
  • US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 7:42 a.m. Tokyo time. The S&P 500 rose 1.5%
  • Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 2.2%
  • Nikkei 225 futures rose 0.7%
  • Australia’s S&P/ASX 200 Index futures rose 0.7%
  • Hang Seng Index futures rose 1.1%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.0881
  • The Japanese yen was little changed at 145.85 per dollar
  • The offshore yuan was little changed at 7.2837 per dollar
  • The Australian dollar was little changed at $0.6480

Cryptocurrencies

  • Bitcoin rose 0.2% to $27,625.24
  • Ether rose 0.2% to $1,730.95

Bonds

  • The yield on 10-year Treasuries declined eight basis points to 4.12%
  • Australia’s 10-year yield declined four basis points to 4.06%

Commodities

  • West Texas Intermediate crude rose 0.2% to $81.36 a barrel
  • Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth.

More stories like this are available on bloomberg.com

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