Shares in Asia followed Wall Street higher as US economic reports pointed to slowing growth, adding to bets the Federal Reserve is nearing the end of its tightening cycle.
(Bloomberg) — Shares in Asia followed Wall Street higher as US economic reports pointed to slowing growth, adding to bets the Federal Reserve is nearing the end of its tightening cycle.
Equities in Japan and Hong Kong stock futures rose, while Australian shares were little changed, partly weighed down by Qantas Airways Ltd., which fell on news of legal action. The S&P 500 advanced for a fourth day Wednesday, extending this week’s gains to 2.5%. The tech-heavy Nasdaq 100 has climbed 3.5% this week.
The recent stock gains have only partly unwound broad-based losses for August. The S&P 500 is still heading for the worst month since February, while the Nasdaq 100 is set for the largest decline this year. Asian and global stocks are also on pace for the biggest monthly losses since February.
Australian and New Zealand bonds rose after Treasuries made modest gains Wednesday, helped by the weaker-than-expected data. US gross domestic product rose at a 2.1% annualized pace in the second quarter, lower than the government’s previous estimate. An industry gauge of employment showed fewer jobs were added than economists forecast, while a measure of consumer confidence was also softer than expected.
The underwhelming numbers supported predictions for the Fed to ease back on interest-rate hikes. Swap contracts are now pricing in less than a 50% chance of another quarter-point increase this year. The dollar retreated slightly while the yen strengthened.
Bad Is Good
“Investors are reacting with a ‘bad news is good news’ approach, betting that a slowing economy will lead to a less aggressive Federal Reserve,” said Mark Hackett, chief of investment research at Nationwide Funds Group. “This has calmed investors, but adds an element of risk if the pendulum continues to swing, as an earnings recovery is critical for a continued strong market.”
In China, investors are focused on official purchasing managers index data due Thursday that is forecast to show further weakness in manufacturing and slowing growth in services.
Additional signs of official support for the world’s second largest economy emerged on Wednesday. The People’s Bank of China is drafting preliminary policies to give private businesses better access to funding, local media reported.
Elsewhere, Country Garden Holdings Co. signaled it may default on its debt after the embattled Chinese developer posted a record first-half loss of almost $7 billion.
In US corporate news, Apple is testing the use of 3D printers to produce smartwatch components, according to people with knowledge of the matter. US prosecutors are investigated a Tesla Inc. plan to purchase hard-to-get construction materials. Visa Inc. and Mastercard Inc. shares rose on plans to boost the fees charged to retailers.
The price of oil clung to gains in early Asian trading after ending Wednesday with its fifth daily advance. Gold edged higher after a string of gains this week. Bitcoin traded above $27,000.
Key events this week:
- China manufacturing PMI, non-manufacturing PMI, Thursday
- Japan industrial production, retail sales, Thursday
- Eurozone CPI, unemployment, Thursday
- ECB publishes account of July monetary policy meeting, Thursday
- US personal spending and income, initial jobless claims, Thursday
- China Caixin manufacturing PMI, Friday
- Eurozone S&P Global Eurozone Manufacturing PMI, Friday
- South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
- Boston Fed President Susan Collins speaks at virtual event, Friday
- US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:13 a.m. Tokyo time. The S&P 500 rose 0.4%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.6%
- Hang Seng futures rose 0.9%
- Japan’s Topix rose 0.2%
- Australia’s S&P/ASX 200 was little changed
- Euro Stoxx 50 futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0929
- The Japanese yen rose 0.1% to 146.07 per dollar
- The offshore yuan was little changed at 7.2988 per dollar
Cryptocurrencies
- Bitcoin was little changed at $27,266.65
- Ether was little changed at $1,703.15
Bonds
- The yield on 10-year Treasuries was little changed at 4.12%
- Japan’s 10-year yield advanced one basis point to 0.650%
- Australia’s 10-year yield declined three basis points to 4.04%
Commodities
- West Texas Intermediate crude rose 0.2% to $81.76 a barrel
- Spot gold rose 0.1% to $1,944.95 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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