Chinese stocks rallied while other Asian markets erased declines after factory activity in the world’s second-largest economy improved more than analysts forecast.
(Bloomberg) — Chinese stocks rallied while other Asian markets erased declines after factory activity in the world’s second-largest economy improved more than analysts forecast.
The offshore yuan strengthened by more than 0.4%, while Australia’s currency, which is sensitive to China’s outlook, reversed an earlier decline to climb about 0.2%.
The Hang Seng China stock gauge rallied more than 3% as the gauge of China’s manufacturing activity climbed to the highest level in more than a decade. An Asian equity benchmark changed course and rose by the most in a month, while futures for the S&P 500, the Nasdaq 100 and Euro Stoxx 50 all pared losses.
The better-than-expected economic news from China comes as investors await developments in the lead-up to the National People’s Congress. The latest data “should keep the yuan on a firm footing” heading into the event, while “commodity currencies such as the Australian dollar may also be buoyed on expectations of a solid Chinese demand recovery,” said Wei Liang Chang, a strategist at DBS Bank Ltd.
“China’s in a relatively good place at the moment relative to other major economies in terms of the easing cycle,” Elizabeth Kwik, Asian equities investment director at abrdn, said on Bloomberg Television. Any growth stimulus signals from the government “will be something good to watch that might come out of the NPC,” she said, referring to the congress.
A gauge of dollar strength fell and Treasury yields edged higher. US two-year yields climbed about 10 basis points in February, and the 10-year yield rose more than 40 basis points. Yields on Australian and New Zealand government bonds slipped.
Bond yields rose in Europe on Tuesday after hot inflation data caused a reassessment of rate expectations, picking up a theme has dominated trading in a month that saw the Federal Reserve signal its intention to ratchet rates higher than the market had been anticipating.
Bond traders no longer view the odds of a Fed rate cut this year as better than-even, a shift from what they were expecting just a month ago. Market expectations also see the European Central Bank raising rates through February 2024, with a 4% ECB terminal rate fully priced.
Elsewhere, oil climbed on China’s economic rebound outlook and gold rose.
Key events this week:
- Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
- US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
- Eurozone CPI, unemployment, Thursday
- US initial jobless claims, Thursday
- Eurozone S&P Global Eurozone Services PMI, PPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 12:41 p.m. Tokyo time. The S&P 500 fell 0.3%
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.1%
- Japan’s Topix index was little changed
- Hong Kong’s Hang Seng Index rose 3.3%
- China’s Shanghai Composite Index rose 0.9%
- Australia’s S&P/ASX 200 Index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0595
- The Japanese yen fell 0.1% to 136.31 per dollar
- The offshore yuan rose 0.4% to 6.9251 per dollar
Cryptocurrencies
- Bitcoin rose 1.4% to $23,463.16
- Ether rose 2% to $1,638.02
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.93%
- Australia’s 10-year yield declined seven basis points to 3.79%
Commodities
- West Texas Intermediate crude rose 0.6% to $77.48 a barrel
- Spot gold rose 0.2% to $1,830.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Charlie Zhu, Wenjin Lv and Akshay Chinchalkar.
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