Asian shares advanced Monday after a chaotic week for financial markets ended Friday with a rally in risk assets.
(Bloomberg) — Asian shares advanced Monday after a chaotic week for financial markets ended Friday with a rally in risk assets.
Stocks moved firmly higher in South Korea and Australia while Japan’s benchmark Topix index fluctuated as traders there returned from national holidays. Equity futures pointed to gains of less than 1% in Hong Kong.
A gauge of Australia’s financial shares rose more than 1%, led by Westpac Banking Corp.’s gain of about 2.5% after the lender reported first-half net profit that was slightly ahead of analyst estimates.
Contracts for US equities fell in early Asian trading hours after the strong performance on Wall Street Friday. The S&P 500 halted its longest losing streak since February and climbed 1.9% as US regional banks rebounded. The KBW Bank Index of financial heavyweights rebounded from its lowest since September 2020.
The Nasdaq 100 rose 2.1%, with strong earnings at Apple Inc. helping lift the megacap tech space as the world’s most-valuable company climbed almost 5%.
Most major currencies were little changed in early trading on Monday after a gauge of dollar strength ended last week down 0.6%. The greenback advanced 0.2% versus the yen.
Treasury yields climbed, with yields also rising in Australia and New Zealand.
US jobs data last week showed hiring and worker pay gains accelerated in April in signs of labor-market resilience and inflationary pressures in the face of headwinds. The solid data has tempered fears of a US recession, improving sentiment that saw Treasuries fall and Wall Street’s favorite volatility gauge, the VIX, snap a four-day surge.
The strong figures also increase chances the Federal Reserve will hold rates higher for longer and potentially keep the door open to an 11th straight hike in June.
Rates on swap contracts linked to Fed meetings — which on Thursday briefly priced in a cut in July — moved higher, to levels consistent with a stable policy rate until September — followed by at least two quarter-point cuts by year-end.
Worries Remain
Despite Friday’s stock rebound, investors still have much to worry about. The rout in US bank shares has the S&P 500 financials index on the verge of falling back below its 2007 peak.
“More demand destruction has to happen, more breakage will be a consequence of it,” George Boubouras, head of research at K2 Asset Management, said of the Fed’s monetary policy impact on Bloomberg Radio. “The market will have a conniption and volatility spike for a few days here and there.”
Meanwhile, Treasury Secretary Janet Yellen sees “simply no good options” for solving the debt limit stalemate in Washington without Congress lifting the cap. She even cautioned that resorting to the 14th Amendment would provoke a constitutional crisis.
Investors will be awaiting the release this week of the core consumer price index, which excludes food and energy and is closely watched by the Fed. It is projected to show a 5.5% increase in April from a year ago.
In Asia, attention will swing to China’s trade figures due in the first half of the week and inflation numbers set for release on Thursday.
Elsewhere in markets, oil opened with a gain as investors assessed a complex outlook for global demand after a period of volatile trading. Gold was little changed.
Key events this week:
- US wholesale inventories, Monday
- US President Joe Biden scheduled to meet with congressional leaders on debt limit, Tuesday
- New York Fed President John Williams speaks to Economic Club of New York, Tuesday
- US CPI, Wednesday
- China PPI, CPI, Thursday
- UK BOE rate decision, industrial production, GDP, Thursday
- US PPI, initial jobless claims, Thursday
- Group of Seven finance minister and central bank governors meet in Japan, Thursday
- US University of Michigan consumer sentiment, Friday
- Fed Governor Philip Jefferson and St. Louis Fed President James Bullard participate in panel discussion on monetary policy at Stanford University, Friday.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 9:21 a.m. Tokyo time. The S&P 500 rose 1.9% Friday.
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 2.1%
- Japan’s Topix index was little changed
- Australia’s S&P/ASX 200 Index rose 0.9%
- Hong Kong’s Hang Seng futures rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1021
- The Japanese yen fell 0.2% to 135.05 per dollar
- The offshore yuan was little changed at 6.9236 per dollar
- The Australian dollar was little changed at $0.6751
Cryptocurrencies
- Bitcoin fell 1.2% to $28,607.21
- Ether fell 1.9% to $1,883.18
Bonds
- The yield on 10-year Treasuries was little changed at 3.44%
- Australia’s 10-year yield advanced seven basis points to 3.38%
Commodities
- West Texas Intermediate crude was little changed
- 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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