Japan Stocks Extend Gains on GDP Data; Yuan Falls: Markets Wrap

Japan equities extended their winning streak as better-than-expected economic growth fueled optimism over the market’s outlook. The offshore yuan weakened.

(Bloomberg) — Japan equities extended their winning streak as better-than-expected economic growth fueled optimism over the market’s outlook. The offshore yuan weakened.

The Topix index advanced for a fourth day after the gauge closed at the highest level since 1990 on Tuesday, while the Nikkei 225 index was in the fifth day of gains. The nation’s markets may be on the cusp of a rare bull market, according to Goldman Sachs Group Inc. The government said Wednesday gross domestic product expanded at the fastest pace in three quarters as a further easing of pandemic regulations boosted consumer spending.

The offshore yuan, meanwhile, fell to as weak as 7.0101 to the US currency Wednesday, the first time it has breached the 7 level since late December as economic data continued to disappoint. Shares in mainland declined, while the Hang Seng China Enterprises Index dropped as much as 0.9%.

A slew of weaker-than-expected data from China, from industrial output to retail sales and home prices, has raised concerns over the strength of recovery in the world’s second biggest economy and spurred calls for more policy stimulus to bolster growth. 

“Right now when we’re talking to both onshore and offshore investors, the sentiment is actually quite weak,” Marcella Chow, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “We do hope the Chinese central banks or actually authorities might change from more the wait-and-see to a bit more proactive easing.”

An earnings release by Tencent Holdings Ltd. later Wednesday may aid sentiment in China. The tech giant is expected to post its biggest rise in quarterly revenue since 2021 on a gradual recovery in spending and advertising.

Shares advanced in South Korea and fell in Australia. US stock futures edged higher in Asia after the Nasdaq 100 closed up just 0.1% and the broader S&P fell, following a rapid decline in the final minutes of the session. President Joe Biden and House Speaker Kevin McCarthy were hopeful when asked whether a deal on the debt-ceiling could be reached within days to end a stalemate ahead of a potential US default.

Distorted Bills

The market impact of debt-ceiling concerns has been largely confined to distorted Treasury bill yields, with those maturing in early June trading at higher yields, according to Andrew Hollenhorst, chief US economist at Citigroup Inc.

“When a deal is passed to push the debt ceiling out, Treasury will look to rapidly rebuild its cash balance,” he wrote in a note. “That means significant issuance of T-bills and a drain of private-sector liquidity as cash currently in bank reserves and the Fed’s reverse repo program flows into Treasury’s cash account.”

Treasuries and the dollar were both little changed in early Asian trade. That was after US government debt fell across the curve on Tuesday, with the 30-year yield climbing to 3.90% — the highest since the run-up to the banking turmoil that erupted in early March. New Zealand and Australian bonds fell. 

Richmond Federal Reserve President Thomas Barkin said he was still looking to be convinced that inflation has been defeated and that he’d support raising rates further if needed. Cleveland Fed President Loretta Mester said the central bank is unable to do much about slow long-term economic growth, but can “do its part” by curbing prices.

Elsewhere, oil steadied amid China’s lackluster recovery that overshadowed a bullish outlook from the International Energy Agency and positive US data. Gold remained below $2,000.

Key events this week:

  • Eurozone CPI, Wednesday
  • BOE Governor Andrew Bailey delivers keynote speech, Wednesday
  • US housing starts, Wednesday
  • US initial jobless claims, Conference Board leading index, existing home sales, Thursday
  • Japan CPI, Friday
  • ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
  • New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 1:21 p.m. Tokyo time. The S&P 500 fell 0.6%
  • Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 0.1%
  • Japan’s Topix index rose 0.3%
  • Hong Kong’s Hang Seng Index fell 0.6%
  • China’s Shanghai Composite Index fell 0.2%
  • Australia’s S&P/ASX 200 Index fell 0.5%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.0864
  • The Japanese yen fell 0.1% to 136.53 per dollar
  • The offshore yuan fell 0.1% to 7.0089 per dollar
  • The Australian dollar was little changed at $0.6658

Cryptocurrencies

  • Bitcoin rose 0.5% to $27,079.26
  • Ether rose 0.2% to $1,824.81

Bonds

  • The yield on 10-year Treasuries declined one basis point to 3.52%
  • Japan’s 10-year yield declined two basis points to 0.37%
  • Australia’s 10-year yield advanced two basis points to 3.43%

Commodities

  • West Texas Intermediate crude was little changed
  • Spot gold rose 0.1% to $1,991.35 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Wenjin Lv.

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