Equities in Asia and US equity futures advanced in a broad-based rally helped along by rising tech shares and signs the Federal Reserve is nearing the end of its rate-hiking campaign.
(Bloomberg) — Equities in Asia and US equity futures advanced in a broad-based rally helped along by rising tech shares and signs the Federal Reserve is nearing the end of its rate-hiking campaign.
Equity benchmarks in Japan, Australia and South Korea rose while shares in Hong Kong headed for their best day in a month, led by a gain in tech stocks. The S&P 500 rose 1.1% Wednesday, its best session since June, while the Nasdaq 100 added 1.6%. Futures contracts for the two benchmarks rallied further following bullish earnings from Nvidia Corp.
The chip-maker, a major constituent of both US benchmarks, advanced in extended trading following earnings that forecast quarterly sales to reach $16 billion, eclipsing the $12.5 billion anticipated by analysts. The company’s Asia-based suppliers also rallied, with the tech-reliant South Korean won also surging.
Australia and New Zealand bond yields fell while Treasury yields stabilized after retreating across the curve Wednesday. The 10-year yield fell 13 basis points after touching a 2007 high this week, while the policy-sensitive two-year yields declined eight basis points to below 5%.
Those moves were helped along by US flash purchasing managers index data for August that came in softer than expected, echoing underwhelming eurozone data.
“In terms of the economic data, it look like bad news is good news for the market,” said Grace Tam, chief investment advisor, Hong Kong, for BNP Paribas Wealth Management on Bloomberg Television. “In terms of PMIs in the US and Europe, it’s good news for the market because they are now expecting no more rate hikes in the future. This is a tail wind for AI and tech stocks.”
The broad risk-on rally reduced the cost of insurance against default for Asia’s investment grade dollar bonds, with one gauge of credit default swaps heading for its steepest decline in nine months.
Pockets of concern remained, however. In China, the $2.9 trillion trust industry is showing signs of strain, adding further pressure on the economy, while insiders are also worried that efforts to improve the health of local government financing vehicles may not play out as hoped. The People’s Bank of China provided further support for the yuan, setting the daily reference rating stronger than estimates.
Meanwhile, the Bank of Korea held its benchmark interest rate steady as did policymakers in Sri Lanka. Traders will also be monitoring Bank Indonesia’s rate decision later today.
Jackson Hole
The drop in Treasury yields weighed on the greenback and comes ahead of Powell’s speech on Friday at the Jackson Hole symposium.
The Fed chair is expected to outline the final steps in the central bank’s inflation-fighting campaign following weeks of pressure on stocks and government bonds, which has increased borrowing costs for businesses and households.
“The recent surge in bond yields has pushed up mortgage and corporate borrowing rates, contributed to the fall in stock prices, and generated upward pressures on the dollar,” said Krishna Guha, vice chairman at Evercore ISI. “The Fed will have to consider the tightening in financial conditions when setting rates in coming months, including the decision on whether to hike in September.”
US mortgage applications for home purchases tumbled to an almost three-decade low. A US government report also said that job growth in the year through March will probably be revised down by around 300,000.
Elsewhere in corporate news, Esmark Inc. said it won’t make a takeover offer for US Steel Corp. and WeWork Inc. is rounding up advisers for help with a restructuring as it struggles with a heavy debt load, according to people with knowledge of the matter.
In commodities, oil fell for a fourth day as an improving supply outlook hit a market grappling with sluggish demand in the biggest importers. Gold edged higher.
Key events this week:
- US initial jobless claims, durable goods, Thursday
- Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
- Japan Tokyo CPI, Friday
- US University of Michigan consumer sentiment, Friday
- Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.7% as of 1:33 p.m. Tokyo time. The S&P 500 rose 1.1%
- Nasdaq 100 futures rose 1.2%. The Nasdaq 100 rose 1.6%
- Japan’s Topix rose 0.4%
- Australia’s S&P/ASX 200 rose 0.5%
- Hong Kong’s Hang Seng rose 1.9%
- The Shanghai Composite rose 0.5%
- Euro Stoxx 50 futures rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0867
- The Japanese yen fell 0.2% to 145.14 per dollar
- The offshore yuan rose 0.1% to 7.2770 per dollar
- The Australian dollar was little changed at $0.6478
Cryptocurrencies
- Bitcoin fell 0.6% to $26,423.75
- Ether fell 0.6% to $1,673.91
Bonds
- The yield on 10-year Treasuries advanced one basis point to 4.20%
- Japan’s 10-year yield declined two basis points to 0.655%
- Australia’s 10-year yield declined seven basis points to 4.12%
Commodities
- West Texas Intermediate crude fell 0.3% to $78.62 a barrel
- Spot gold rose 0.3% to $1,920.31 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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