Shares in Asia held to tight ranges and the dollar clung to a recent rally against the backdrop of a likely protracted period of higher US interest rates and a relentless property crisis in China.
(Bloomberg) — Shares in Asia held to tight ranges and the dollar clung to a recent rally against the backdrop of a likely protracted period of higher US interest rates and a relentless property crisis in China.
US equity futures ticked higher after Tuesday’s losses on Wall Street pushed the S&P 500 and Nasdaq 100 1.5% lower. European share futures were steady, while a measure of global equities teetered on the edge of its longest losing streak in more than a decade.
In Asia, shares edged higher in South Korea, Japan and China, while those in Australia dipped. The advance for equities in Hong Kong and the mainland followed data showing improved industrial profits in China and appeared to shrug off further turmoil in the property sector.
A gauge of Chinese property developers fell for a third day and headed for its lowest closing level since 2011. Cifi Holdings Group Co. shares halved after trading was reinstated after a six-month break, China Evergrande Group’s billionaire founder and chairman Hui Ka Yan was placed under police control, and Country Garden Holdings Co Ltd faced fresh interest payment deadlines. A looming holiday that will shut markets on the mainland for six trading days also added to the sentiment.
“Ultimately, a lot of it will depend on rates and rate volatility,” said Chamath De Silva, a senior fund manager at Betashares in Sydney. “Global equity selling will probably take a breather once the global bond selloff does.”
China will just about meet its economic growth target of around 5% for this year, the latest Bloomberg survey shows, although the ongoing property crisis is raising the risk of a miss.
Yields on Treasuries were slightly lower but remained near decade highs. The Bloomberg dollar index held around its 2023 peak after a run of strengthening. The yen remains near 149 per dollar, keeping traders on edge for any step up in language from Japanese officials to gauge whether intervention to support the currency is on the horizon.
With the bond market guiding the direction for stocks and currencies, investors are pondering whether 10-year Treasury yields will extend gains, said Tony Sycamore, an analyst at IG in Sydney. If current levels break, “then there is little in the way of upside resistance until the 4.90%/5.00% region, which would likely unleash a violent response in equity markets.”
Emphatic Fed
One Fed speaker after another in the past week has delivered emphatic messages that they will keep policy tighter for longer if the economy is stronger than expected. The Fed’s hikes have hit consumer sentiment which dropped to 103 from a revised 108.7 in August, missing the median estimate of 105.5 in a Bloomberg survey of economists.
Meanwhile, Senate Democratic and Republican leaders agreed Tuesday on a plan to keep the government open through mid-November and provide $6 billion in assistance to Ukraine. The plan to avert a shutdown on Oct. 1 still needs to overcome gridlock in the House.
Investors “seem to favor the cut-run manoeuvre this week,” said Stephen Innes, managing partner at SPI Asset Management. “Heightened investor anxiety due to the looming possibility of a partial US government shutdown is not helping matters.”
Elsewhere in Asia, Australia’s monthly inflation gauge accelerated, reflecting global trends amid higher oil prices, bolstering the case for the Reserve Bank to hike at least one more time.
In commodities, oil resumed its climb, moving back above $91 a barrel, as the effect of rapidly tightening supplies outweighed a weakening risk appetite in broader markets, while gold fell below $1,900 an ounce.
Key events this week:
- US durable goods, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
- Eurozone CPI, Friday
- Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
- US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.3% as of 7:08 a.m. London time. The S&P 500 fell 1.5%
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 1.5%
- Japan’s Topix rose 0.3%
- Australia’s S&P/ASX 200 fell 0.1%
- Hong Kong’s Hang Seng rose 0.6%
- The Shanghai Composite rose 0.2%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0562
- The Japanese yen was little changed at 149.12 per dollar
- The offshore yuan was little changed at 7.3093 per dollar
- The Australian dollar fell 0.3% to $0.6381
- The British pound was little changed at $1.2148
Cryptocurrencies
- Bitcoin rose 0.4% to $26,247.65
- Ether rose 0.4% to $1,592.37
Bonds
- The yield on 10-year Treasuries was little changed at 4.53%
- Japan’s 10-year yield was unchanged at 0.740%
- Australia’s 10-year yield declined two basis points to 4.38%
Commodities
- West Texas Intermediate crude rose 1% to $91.31 a barrel
- Spot gold fell 0.1% to $1,897.97 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess.
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