Stocks in Asia rose and metals rallied as China ramped up stimulus to aid its ailing economy, while traders awaited Friday’s jobs reading to gauge the Federal Reserve’s policy outlook.
(Bloomberg) — Stocks in Asia rose and metals rallied as China ramped up stimulus to aid its ailing economy, while traders awaited Friday’s jobs reading to gauge the Federal Reserve’s policy outlook.
The MSCI Asia Pacific Index was headed for a second straight week of gains, the longest such streak since mid-June. Mainland China shares climbed after closing the month over 5% lower, with energy, financial and property stocks among the best performers. US stock futures edged higher, while Hong Kong’s market is shut on what may be the strongest storm to hit the city in at least five years.
Aluminum and copper were up as metals looked set to extend this week’s advances.
The yuan strengthened against the greenback after China’s central bank reduced the foreign exchange reserve requirement ratio for financial institutions in a bid to support the currency. The currency has since pared its gains.
Investors also welcomed moves by the government to allow the nation’s largest cities to cut down payments for home buyers and encouraged lenders to lower rates on existing mortgages as well as on deposits. Bank of China Ltd. and several other major lenders followed through by lowering deposit rates.
Sentiment was further buoyed by an unexpected rise in manufacturing data that advanced to 51 in August, the highest reading since February, according to a Caixin survey.
As the property easing measures and the FX RRR cut were announced before the market opened, “there could be some element of that timing being used to help sustain China assets especially with the PMIs giving some positive signals,” said Eddie Cheung, senior emerging market strategist at Credit Agricole CIB in Hong Kong.
The picture was also rosy in Japan after data earlier showed companies’ profits rose 11.6% on an annual basis in the second quarter. The Topix index posted its eight consecutive month of increase in August — the longest winning streak since 2013 — and the gauge was now set for the best weekly advance since October.
The 10-year yield had extended its retreat Thursday after recently hitting levels last seen in 2007 while an index of dollar strength had its best month since February. Treasuries steadied during Asian trading, while the dollar was little changed.
Fed Outlook
Concerns that the Fed will keep interest rates higher for longer to prevent a flare-up in price pressures has taken the wind out of equity markets around the world, adding to worries about China’s faltering economic growth.
The Fed’s preferred measure of underlying inflation saw the smallest back-to-back increases since late 2020, encouraging consumer spending. Markets took the report in stride, with the numbers illustrating the divergence within the US economy, according to Jeffrey Roach at LPL Financial.
Wall Street is now bracing for Friday’s labor-market data, which will provide further insights on the Fed’s next steps. The report is forecast to show employers boosted their payrolls by nearly 170,000 in August, while the unemployment rate held at a historic low of 3.5%.
The Fed may be slower to cut rates than many market participants expect, said Bridgewater Associates Co-Chief Investment Officer Karen Karniol-Tambour.
“When you look at what it takes to get fast rate declines, usually you need the economy collapsing pretty quickly,” she said in an interview for an upcoming episode of Bloomberg Wealth with David Rubenstein. “That’s very far from where we are today.”
Fed Bank of Atlanta President Raphael Bostic said policymakers need to be cautious not to overtighten monetary policy and risk unnecessary harm to the US labor market.
Elsewhere, oil is set for a weekly gain after Russia signaled that it would extend export curbs and US inventories dropped further. Gold headed for the second weekly advance.
Key events this week:
- 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 12:45 p.m. Tokyo time. The S&P 500 fell 0.2%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.2%
- Japan’s Topix rose 0.7%
- Australia’s S&P/ASX 200 fell 0.4%
- The Shanghai Composite rose 0.2%
- Euro Stoxx 50 futures rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0841
- The Japanese yen was little changed at 145.47 per dollar
- The offshore yuan was little changed at 7.2712 per dollar
- The Australian dollar fell 0.2% to $0.6470
Cryptocurrencies
- Bitcoin rose 0.2% to $26,062.82
- Ether rose 0.1% to $1,651.23
Bonds
- The yield on 10-year Treasuries was little changed at 4.10%
- Japan’s 10-year yield declined 0.5 basis point to 0.635%
- Australia’s 10-year yield declined three basis points to 3.99%
Commodities
- West Texas Intermediate crude rose 0.2% to $83.78 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck, Wenjin Lv and Chester Yung.
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