Shares in Asia swung between gain and losses as investors assessed a potential turning point for Chinese tech companies and constructive dialogue between Beijing and Washington.
(Bloomberg) — Shares in Asia swung between gain and losses as investors assessed a potential turning point for Chinese tech companies and constructive dialogue between Beijing and Washington.
Equity benchmarks fluctuated in Japan and South Korea, while rising in Australia. US stock futures were little changed after most American equities slipped Friday when wage data showed inflation remained a threat. The S&P 500 fell 1.2% over the holiday shortened week, while the Nasdaq 100 dropped 0.9%.
Treasury Secretary Janet Yellen’s two-day engagement with top officials in Beijing is seen as offering a way for the US and China to contain damage in their economies from the two nations’ intensifying rivalry. “I expect that this trip will help build a resilient and productive channel of communication with China’s new economic team,” she said.
Treasury yields steadied with the two-year remaining below 5% and the 10-year under 4%. Yields on policy-sensitive shorter maturity government debt in Australia and New Zealand dropped in Monday trading.
The dollar edged higher against all its Group-of-10 peers after the Bloomberg Dollar Spot Index slid on Friday.
Investors still face a host of competing forces as trading got underway in Asia, including the risk of higher interest rates and recession.
A spate of jobs reports last week have tamped down speculation the Federal Reserve would leave interest rates unchanged later this month. The outlook beyond that was unclear. Government jobs data fell short of estimates but brought signs that wage inflation remained a threat to the Fed’s fight against price gains.
Inflation Data
Traders will be closely watching this week’s US consumer price print. Bloomberg economists are expecting the headline number to fall 3.1% though they don’t see that stopping the Fed hiking on July 26. Reports from big banks including Citigroup Inc. and JPMorgan Chase & Co. may also set the tone for second quarter earnings.
Downside surprises in this week’s inflation indicators could charge up the bulls, taking the S&P 500 above the bull market’s channel, according to Ed Yardeni, president of his namesake research firm. “On the other hand, higher-than-expected inflation readings could heighten fears that the Fed will have to tighten monetary policy to cause a recession as the only clear way to bring inflation down.”
Yellen said over the weekend she wouldn’t rule out the threat of a US recession, noting that it was “appropriate and normal” for growth to moderate and that inflation remains too high.
News for Chinese technology companies was constructive, with the imposition of large fines on Alibaba Group Holdings Ltd. affiliate Ant Group Co. and Tencent Holdings Ltd. seen as signaling an end to a crackdown on the sector.
An index of US listed Chinese companies rallied more than 3% on Friday, with Alibaba surging 8%. Ant is also proposing to buy back as much as 7.6% of shares, according to a person familiar with the matter.
Chinese consumer price and producer price figures will also be focus Monday, with the latter in particular expected to show a lack of inflationary pressure.
Oil edged lower Monday after two consecutive weekly increase and gold steadied.
Key events this week:
- China CPI, PPI, Monday
- US wholesale inventories, Monday
- Federal Reserve speakers include Mary Daly, Loretta Mester, Raphael Bostic and Michael Barr, Monday
- Bank of England Governor Andrew Bailey delivers speech, Monday
- St. Louis Fed President James Bullard speaks, Tuesday
- Canada rate decision, Wednesday
- US CPI, Wednesday
- Federal Reserve issues Beige Book, Wednesday
- Federal Reserve speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
- Bank of England Governor Andrew Bailey speaks, Wednesday
- China trade, Thursday
- Eurozone industrial production, Thursday
- US initial jobless claims, PPI, Thursday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:09 a.m. Tokyo time. The S&P 500 fell 0.3% on Friday
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.4%
- Japan’s Topix index rose 0.2%
- Australia’s S&P/ASX 200 Index rose 0.6%
- Hong Kong’s Hang Seng futures rose 2.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0963
- The Japanese yen fell 0.1% to 142.38 per dollar
- The offshore yuan was little changed at 7.2296 per dollar
- The Australian dollar was little changed at $0.6692
Cryptocurrencies
- Bitcoin fell 0.3% to $30,117.94
- Ether fell 0.7% to $1,857.25
Bonds
- The yield on 10-year Treasuries was little changed at 4.06%
- Japan’s 10-year yield advanced one basis point to 0.455%
- Australia’s 10-year yield advanced one basis point to 4.27%
Commodities
- West Texas Intermediate crude fell 0.5% to $73.51 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee and Vildana Hajric.
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