Stocks in Asia were set to cap the highest close in almost four months, supported by a rally in Hong Kong shares amid hopes for stimulus in China and a positive sign in geopolitics.
An Asian equity gauge gained as much as 0.4% as Hong Kong’s Hang Seng Index advanced around 1%, while the market’s technology measure jumped by about twice that.
Japanese stocks erased gains amid selling in the electric appliances sector, a tick up in the yen and positioning ahead of an expiry in equity futures contracts. India’s Nifty 50 Index inched closer to its highest level on record, but for the Adani Group, the impact of US short seller Hindenburg Research’s bombshell report remained on some of its stocks.
With traders on the lookout for more government help to support China’s tepid economic recovery, optimism for stimulus is rising after authorities asked the nation’s biggest banks to lower their deposit rates. Bloomberg Economics expects the People’s Bank of China to lower its one-year benchmark interest rate “as soon as mid-June.”
Meanwhile, US Secretary of State Antony Blinken plans to visit China in the coming weeks, providing scope for improvement in fraught relations between Washington and Beijing, which have weighed on stocks in Hong Kong and Shanghai.
At current valuations, it’s probably good to go a bit overweight on Chinese stocks, according to Ayaz Ebrahim, emerging market and Asia Pacific equities portfolio manager at JPMorgan Asset Management. Morgan Stanley’s chief China equity strategist, Laura Wang, said she expected to see 9% earnings growth this year, supported by the government’s measures.
Stocks in mainland China fluctuated after trade data showed exports fell more than expected in May. The offshore yuan was little changed.
Europe equity futures held on to small gains and those of US stocks steadied Wednesday. A rotation into financial shares Tuesday suggested the breadth of the S&P 500’s recent rally might extend beyond technology soon. While a decline in Apple Inc. crimped gains, the benchmark gauge still rose 0.2%. The KBW Regional Bank index added more than 5% and the Russell 2000 climbed 2.7%.
In currency markets, a gauge of greenback strength was little changed, while the yen appreciated and the Turkish lira dropped 3% to a record low. Treasury yields were steady across tenors after a Treasury bill auction announcement weighed on short-dated US bonds on Tuesday.
The small gain on Wall Street Tuesday still left the S&P 500 just short of a bull market. The mood across global markets has been cautious with some questioning if prices have run up too fast on the hype for artificial intelligence.
In commodities, gold was little changed. Oil fell after giving up gains Tuesday off news of Saudi Arabia’s supply cut. Wheat surged after Ukraine said Russian forces blew up a giant dam in the country’s south.
The World Bank said in a report Tuesday the global economy is in a precarious situation as sharp interest-rate hikes hit activity and stir vulnerabilities in lower-income countries. Those fears have suppressed equities.
But with the rate of US inflation still high, traders increasingly expect the Federal Reserve will hold rates steady at its June meeting, while keeping the option for hikes later on. Former vice-chair Richard H. Clarida also said Tuesday it was unlikely the US central bank will start cutting rates until 2024.
Key events this week:
- China forex reserves, Wednesday
- US trade, consumer credit, Wednesday
- Canada rate decision, Wednesday
- EIA crude oil inventory data, Wednesday
- Eurozone GDP, Thursday
- Rate decisions in India, Peru, Thursday
- Japan GDP, Thursday
- US wholesale inventories, initial jobless claims, Thursday
- China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 6:46 a.m. London time. The S&P 500 rose 0.2%
- Nasdaq 100 futures were little changed. The Nasdaq 100 was little changed
- Japan’s Topix fell 1.1%
- Australia’s S&P/ASX 200 was little changed
- Hong Kong’s Hang Seng rose 1.1%
- 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 $1.0687
- The Japanese yen rose 0.3% to 139.23 per dollar
- The offshore yuan was little changed at 7.1276 per dollar
- The Australian dollar rose 0.1% to $0.6681
- The British pound was little changed at $1.2421
Cryptocurrencies
- Bitcoin fell 0.1% to $26 914.5
- Ether rose 0.1% to $1,879.48
Bonds
- The yield on 10-year Treasuries was little changed at 3.66%
- Japan’s 10-year yield declined one basis point to 0.410%
- Australia’s 10-year yield advanced two basis points to 3.82%
Commodities
- West Texas Intermediate crude fell 0.7% to $71.25 a barrel
- Spot gold was little changed
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