Asian shares rose Monday as positive momentum from gains on Wall Street and signs of moderating US inflation extended this year’s rally in global stocks. The yuan gained after China’s central bank set a stronger-than-expected fix for the currency.
(Bloomberg) — Asian shares rose Monday as positive momentum from gains on Wall Street and signs of moderating US inflation extended this year’s rally in global stocks. The yuan gained after China’s central bank set a stronger-than-expected fix for the currency.
Equities in Shanghai gained more than 1% while Hong Kong-listed technology companies jumped over 3%. Shares of Asian electric-vehicle makers and related suppliers also climbed, benefiting from Tesla Inc. and BYD Co. setting sales records in the second quarter.
Japan’s Topix index was on course for another gain that has the index repeatedly setting fresh highs back as far as mid 1990 amid improved confidence among big manufacturers.
The gains in Chinese stocks Monday contrast with the 6% drop in MSCI Inc.’s China Index in the first half. While many investors remain wary of policy risks and Chinese tepid economic rebound, some are pointing at attractive valuations.
“We’re still positive on the market, mainly from a risk-reward perspective,” James Wang, head of China strategy at UBS Group AG’s investment research unit, said on Bloomberg Television. “The market’s still trading one standard deviation cheap relative to history, two standard deviations cheap relative to the rest of the world.”
US equity futures were flat in Asia after the Nasdaq 100 rose almost 2% last week and notched its best ever first-half of a year. The S&P 500 reached the highest since April 2022 and posted its best first half since 2019, with Apple Inc. hitting the $3 trillion milestone along the way.
Traders were encouraged as data showed inflation is moderating, even if that comes at the expense of growth. The personal consumption expenditures price index, one of the Federal Reserve’s preferred inflation gauges, rose 0.1% in May. From a year ago, the measure stepped down to 3.8%, the smallest annual advance in more than two years.
This kept action in the bond market subdued during the US session Friday and again on Monday in Asia, after what was an eventful first half for the rates market.
Yields on policy sensitive three-year Australian government bond fell about nine basis points Monday ahead of a central bank decision Tuesday that is dividing economists and money markets on the prospects of a rate hike or a pause.
Most major currencies were confined to narrow ranges versus the dollar. The yuan advanced after the People’s Bank of China once again set a stronger-than-expected fix for the currency, although it has since pared its gain.
China’s Caixin manufacturing PMI data showed the world’s second-largest economy is still struggling to rebound. Traders were also weighing the implications of Chinese President Xi Jinping elevating a long-serving technocrat as the central bank’s top Communist Party official, which may indicate no drastic shifts in policy for now.
The yen fell and remained this year’s worst performing Group-of-10 currency, with traders watching for any central bank intervention should the yen depreciate further.
Oil steadied as the second half kicked off, with traders focused on challenges to demand and a complex supply outlook.
From the US to markets around the world, the rally in equities has generated concern as well a celebration, given how much it appears to have decoupled from a worsening economic backdrop.
Nearly $5 trillion has been added to the value of companies in the Nasdaq 100 since the start of the year, with the tech-heavy gauge defying bubble warnings and jumping almost 40%. The advance in the most-influential group in the S&P 500 helped push the index up 16% in 2023. Gains have been even more pronounced when narrowed down to the megacap space — which has soared 74%.
While history shows that first-half rallies in the Nasdaq 100 of at least 10% are followed by returns averaging about 14% over the second half of the year, there’s worry over valuations. This has recently spurred a surge in bearish bets against the largest tech companies. Short interest as a percentage of shares available to trade is near 12-month highs for Microsoft Corp., Tesla Inc. and Amazon.com Inc., according to data compiled by S3 Partners.
Key events this week:
- Eurozone S&P Global Eurozone manufacturing PMI, Monday
- UK S&P Global/CIPS UK Manufacturing PMI, Monday
- US construction spending, ISM Manufacturing, light vehicle sales, Monday
- Australia interest rate decision, Tuesday
- US Independence Day national holiday. Financial markets closed, Tuesday
- China Caixin services and composite PMI, Wednesday
- Eurozone S&P Global Eurozone services PMI, PPI, Wednesday
- OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
- FOMC issues minutes on June policy meeting, Wednesday
- New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
- US initial jobless claims, trade, ISM services, job openings, Thursday
- Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
- US unemployment rate, nonfarm payrolls, Friday
- ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 12:33 p.m. Tokyo time. The S&P 500 rose 1.2% Friday
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1.6%
- Japan’s Topix rose 1.2%
- Hong Kong’s Hang Seng Index rose 1.9%
- China’s Shanghai Composite Index rose 1.3%
- Australia’s S&P/ASX 200 Index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0908
- The Japanese yen fell 0.2% to 144.67 per dollar
- The offshore yuan rose 0.2% to 7.2538 per dollar
- The Australian dollar fell 0.2% to $0.6654
Cryptocurrencies
- Bitcoin rose 0.6% to $30,766.31
- Ether rose 1.6% to $1,949.8
Bonds
- The yield on 10-year Treasuries was little changed at 3.83%
- Japan’s 10-year yield fell 0.5 basis point to 0.390%
- Australia’s 10-year yield declined six basis points to 3.97%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold fell 0.1% to $1,916.76 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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