Asian shares rose Monday as positive momentum from a rally on Wall Street and signs of moderating US inflation underpinned support for global stocks.
(Bloomberg) — Asian shares rose Monday as positive momentum from a rally on Wall Street and signs of moderating US inflation underpinned support for global stocks.
Equities opened higher in Japan, South Korea and Australia while futures for Hong Kong also pointed to early gains. A gauge of US-listed Chinese companies climbed 1% on Friday, adding to positive sentiment for Asia. Tesla Inc. delivering a record number of cars worldwide in the second quarter was also likely to support its suppliers in the region.
Meanwhile, the Bank of Japan’s manufacturing sentiment survey showed confidence among the nation’s big manufacturers rose, the first improvement in almost two years. Sentiment among non-manufacturers was also better.
US equity futures were little changed in Asia’s early hours Monday. The Nasdaq 100 rose almost 2% last week and notched its best ever first-half of a year, with Apple Inc. hitting the $3 trillion milestone along the way. The S&P 500 reached the highest since April 2022 and posted its best first half since 2019.
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 Friday after what was an eventful first half for the rates market. The Treasuries steadied Monday, while yields on policy sensitive three-year Australian government bond slightly fell as trading got underway in Asia.
Major currencies were confined to narrow ranges versus the dollar early Monday after a gauge of greenback strength slipped 0.3% Friday, extending this year’s losses.
The yen was little changed after rebounding from its seven-month low last week. It is this year’s worst performing Group-of-10 currency and investors will be watching for any central bank intervention should the yen weakens further.
At the moment, the BOJ seems willing to act when the officials think things are very lopsided, according to Sean Callow, senior currency strategist at Westpac Banking Corp. However, as long as the BOJ hasn’t adjusted its policy and the Federal Reserves maintains tight policy for longer, “they can’t realistically expect that there’s going to be a sharp appreciation in the yen,” he said on Bloomberg Television. “They can only really monitor where the speculators are.”
Oil was marginally lower as the second half kicked off, with traders focused on challenges to demand and a complex supply outlook.
Investors in Asia will be watching for official manufacturing purchase managers’ indexes across a host of economies Monday, along with readings for the China’s Caixin manufacturing PMI. The China data is expected to underscore the view that the world’s second-largest economy is still struggling to rebound.
Traders will also be 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.
Stocks Decoupling
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:
- China Caixin manufacturing PMI, Monday
- 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 REAIX 2023 event in Aix-en-Provence, France, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:14 a.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 1.1
- Australia’s S&P/ASX 200 Index rose 0.1%
- Hong Kong’s Hang Seng futures rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.0909
- The Japanese yen was little changed at 144.29 per dollar
- The offshore yuan was little changed at 7.2674 per dollar
- The Australian dollar was unchanged at $0.6664
Cryptocurrencies
- Bitcoin rose 0.2% to $30,661.12
- Ether rose 1.1% to $1,940.27
Bonds
- The yield on 10-year Treasuries was little changed at 3.84%
- Australia’s 10-year yield advanced one basis point to 4.03%
Commodities
- West Texas Intermediate crude fell 0.4% to $70.38 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
More stories like this are available on bloomberg.com
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