Asian equities rose following gains on Wall Street and after China stepped up support for its struggling property market.
(Bloomberg) — Asian equities rose following gains on Wall Street and after China stepped up support for its struggling property market.
Shares climbed in Hong Kong and mainland China as investors welcomed news that two Chinese regulators stepped up pressure on financial institutions to ease terms for property companies by encouraging negotiations to extend outstanding loans. Chinese developers advanced.
Benchmark indexes were also higher in Japan, South Korea and Australia. Asian semiconductor sector stocks rose after Taiwan Semiconductor Manufacturing Co. reported better-than-expected sales and their US peers climbed Monday.
US stock futures were little changed after the S&P 500 Index closed up 0.2% Monday and the Nasdaq 100 edged higher.
The dollar weakened against all of its Group-of-10 peers, extending losses made Monday when Treasury yields declined. Government bonds gained in Australia and New Zealand. The yen strengthened, while the offshore yuan was little changed.
Investors in Asia continue to expect more concrete steps from Beijing to bolster the nation’s tepid economic recovery. China’s stuttering recovery is already having wide-ranging impacts on markets, with the chairman of mining giant Rio Tinto Group this week warning of knock-on effects to demand for industrial metals.
Top state-run financial newspapers in China ran reports Tuesday flagging the likely adoption of more property support policies, along with measures to boost business confidence.
“The economic recovery hasn’t come into the type of level that we expected yet,” Cecilia Chan, Asia Pacific chief investment officer at HSBC Global Asset Management, said on Bloomberg Television. “However we maintain an optimistic view with China, we know that the government will give more stimulus measures.”
Inflation Challenge
The challenges in China come as many other countries, including the US, contend with a different issue — higher inflation and rising interest rates. In Monday’s session on Wall Street, traders sifted through remarks from a slew of Federal Reserve speakers while awaiting Wednesday’s consumer price index data that will help determine the path for rate hikes.
Fed officials Michael Barr, Mary Daly and Loretta Mester said the central bank will need to raise rates further this year to slow inflation back down to its 2% goal. Morgan Stanley recommended buying five-year Treasuries on the view inflation is “likely to fall precipitously into year-end.”
“Lower CPI prints, whether it’s Wednesday in the US or whether it’s PPI on Thursday, lower prints would cause probably a rally right now in the bond market where it’s a sigh of relief to say maybe just one hike, not two,” Nancy Davis, Quadratic Capital Management founder and chief investment office, said on Bloomberg Television.
There may be more pain on the way for the S&P 500 as profit warnings and fears of higher interest rates combine to threaten US equities, according to the latest Markets Live Pulse survey. The earnings season kicks off in earnest on Friday, when JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report their numbers.
Morgan Stanley’s Michael Wilson became the latest to warn that earnings forecasts will matter more than usual this time around given elevated equity valuations, higher interest rates and dwindling liquidity.
Elsewhere, oil gained while gold was little changed.
Key events this week:
- St. Louis Fed President James Bullard speaks, Tuesday
- Canada rate decision, Wednesday
- Bank of England Governor Andrew Bailey speaks, Wednesday
- US CPI, Wednesday
- Federal Reserve issues Beige Book, Wednesday
- Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
- China trade, Thursday
- Eurozone industrial production, Thursday
- US initial jobless claims, PPI, Thursday
- US University of Michigan consumer sentiment, Friday
- US banks kick off earnings, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 11:47 a.m. Tokyo time. The S&P 500 rose 0.2%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose less than 0.1%
- Japan’s Topix index rose 0.1%
- Hong Kong’s Hang Seng Index rose 1.2%
- China’s Shanghai Composite Index rose 0.2%
- Australia’s S&P/ASX 200 Index rose 1.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.1% to $1.1015
- The Japanese yen rose 0.4% to 140.73 per dollar
- The offshore yuan was little changed at 7.2288 per dollar
- The Australian dollar rose 0.1% to $0.6684
Cryptocurrencies
- Bitcoin fell 0.9% to $30,508.13
- Ether fell 0.7% to $1,879.65
Bonds
- The yield on 10-year Treasuries was little changed at 3.99%
- Japan’s 10-year yield declined 1.5 basis points to 0.450%
- Australia’s 10-year yield declined nine basis points to 4.20%
Commodities
- West Texas Intermediate crude rose 0.5% to $73.33 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott.
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