Mood Brightens as Chinese Equities Erase Losses: Markets Wrap

Stocks in Asia climbed as sentiment improved in the property sector and on gains among electric vehicle markers.

(Bloomberg) — Stocks in Asia climbed as sentiment improved in the property sector and on gains among electric vehicle markers.

Hong Kong’s Hang Seng Index erased a decline of as much as 1.1% to trade in the green, with property shares wiping out their losses, on news that distressed developer Country Garden Holdings Co. secured approval from its creditors to extend six onshore bonds. The company’s shares surged nearly 10%, while an index of Chinese real estate developers also rose, up 2.7% after falling 2% earlier. 

Expectations of a pickup in EV demand from mid-September further buoyed sentiment and triggered advances in the shares of EV makers, such as XPeng Inc., Li Auto Inc. and BYD Co. Ltd.

Other benchmark indexes in the region were broadly higher as well. US stock futures were marginally lower after tech shares led the way forward Monday, with the Nasdaq 100 rising 1.2%.

In currencies, the yen slightly weakened following a strong advance in the previous session and the greenback steadied after falling by the most in two months. The yuan was little changed after China’s central bank set its daily fixing rate at below 7.20 versus the dollar, another sign that it won’t tolerate excessive yuan weakness. 

The Japanese government saw a solid demand during the auction of its five-year bond Tuesday, with a higher-than-expected cut-off price. The sale was the first since central bank Governor Kazuo Ueda jolted markets with comments on the negative interest rate policy. Yield on the five-year note fell to 0.27% from a day’s high of 0.290% after the auction, while that of the 10-year benchmark bond was up slightly to 0.71%.

While Ueda’s comment excited the markets, the big catalyst has yet to arrive, according to Chris Weston, head of research at Pepperstone Group Ltd. 

“Wages are the core consideration for the BOJ, but we won’t get the outcome of the spring wage negotiations until April 2024,” he wrote in a note. “So realistically, the big catalyst won’t be seen for a while, and any changes in rate setting won’t happen for about six months, although the market lives in the future and will front-run these expectations.”

Stable

In the US, consumers’ inflation expectations were mostly stable in August, but households grew more concerned about their finances and more pessimistic about the job market, according to a Fed Bank of New York survey. 

The consumer-price index report Wednesday will provide the latest insight into how much further the Fed may need to go to pull inflation back toward its target. Monthly inflation is expected to accelerate to 0.6% in August, while core is seen stable at 0.2%, according to economists’ estimates.

“If we do see potentially a more sticky inflation number than the 0.6% expected by economists or 0.2% on core, I would expect to see the bond market start to potentially price in another rate hike before the end of the year, potentially as early as November,” Anthony Doyle, head of investment strategy at Firetrail Investments Pty Ltd, said on Bloomberg Television.

Meanwhile, some 26% of respondents in the latest MLIV Pulse survey say they plan to decrease their exposure to the S&P 500 over the next month. That’s double the amount of those who plan to buy. Only 13% of respondents said they might increase exposure.

In commodities, oil edged up, trading near the highest level this year before reports that may offer further insight into the market’s balances. Gold was little changed. 

Elsewhere, Bitcoin rose after dropping to the lowest since June on Monday, as the world’s largest digital token formed a so-called death cross pattern — in which the 50-day moving average falls below its 200-day marker. Such a crossover typically signals a loss of short-term momentum and further selling pressure ahead.

Key events this week:

  • Germany ZEW survey expectations, Tuesday
  • UK jobless claims, unemployment, Tuesday
  • Apple set to unveil iPhone 15 line and next-generation smartwatches at “Wonderlust,” its biggest product-upgrade event of the year, Tuesday
  • Japan PPI, Wednesday
  • Eurozone industrial production, Wednesday
  • UK industrial production, Wednesday
  • US CPI, Wednesday
  • Tech leaders including Tesla’s Elon Musk and Meta Platforms’ Mark Zuckerberg are set to attend a forum on the future of AI convened by Senator Chuck Schumer, Wednesday
  • Japan industrial production, Thursday
  • European Central Bank policy meeting and news conference by President Christine Lagarde, Thursday
  • US retail sales, PPI, business inventories, initial jobless claims, Thursday
  • China property prices, retail sales, industrial production, Friday
  • US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.1% as of 1:38 p.m. Tokyo time. The S&P 500 rose 0.7%
  • Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1.2%
  • Japan’s Topix rose 0.5%
  • Australia’s S&P/ASX 200 was little changed
  • Hong Kong’s Hang Seng was little changed
  • The Shanghai Composite was little changed
  • Euro Stoxx 50 futures rose 0.2%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.0740
  • The Japanese yen was little changed at 146.69 per dollar
  • The offshore yuan was little changed at 7.3039 per dollar
  • The Australian dollar was little changed at $0.6428

Cryptocurrencies

  • Bitcoin rose 3% to $25,835.45
  • Ether rose 2.9% to $1,586.41

Bonds

  • The yield on 10-year Treasuries was little changed at 4.28%
  • Japan’s 10-year yield was unchanged at 0.710%
  • Australia’s 10-year yield declined two basis points to 4.14%

Commodities

  • West Texas Intermediate crude rose 0.6% to $87.78 a barrel
  • Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott and Masaki Kondo.

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