Asian Equities Advance Ahead of Busy Data Week: Markets Wrap

By Investor Empires On Aug 12, 2024

(Bloomberg) — Asian stocks rose for a second straight session as markets shifted focus to key U.S. data this week for more insight into the health of the world’s largest economy.

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Stocks in the region rose on Monday, after rising 1.5% on Friday. Benchmarks in Australia and South Korea also rose, while Taiwan Semiconductor Manufacturing Co.’s surge on higher revenue helped lift the Taipei index. Hong Kong shares were little changed while mainland Chinese shares were mixed. Japanese markets were closed for a holiday.

Calm returned after markets were roiled early last week by concerns that the Federal Reserve was waiting too long to cut interest rates. The Chicago Board of Trade Volatility Index — a gauge of Wall Street fear — retreated from its highest level since the early days of the Covid-19 pandemic. The yen was weaker against the U.S. dollar on Monday.

“The skies are not completely clear yet, but there are several reasons to suggest that some relatively calmer seas lie ahead,” analysts at Nomura Holdings said in a note, citing easing concerns about a U.S. recession and reduced chances of the Bank of Japan adopting a very hawkish policy among the reasons for optimism.

Elsewhere in Asia, traders will focus on China’s retail sales and industrial production data this week to gauge whether the country’s economy is finding momentum.

China is still battling speculators in the bond market, with state banks selling debt to shore up yields. Yields on benchmark 10-year government bonds were set to post their biggest one-day gain since February at the close. Bond-based wealth management products are exposed to interest rate risks and could lead to losses, the People’s Bank of China said in a quarterly monetary policy report published on Friday.

New Zealand’s central bank will also decide on policy this week, as signs emerge that the economy is entering its third recession in less than two years. Australian and New Zealand government bonds were little changed on Monday. Cash Treasury trading in Asia was closed for a holiday in Tokyo.

The yen rose last week as traders cut their bearish bets in the wake of the Bank of Japan’s rate hike, creating a negative feedback loop as investors sold interest-rate positions that ricocheted across markets, before ending last week little changed. The central bank will not be able to raise rates again this year, given the market turmoil following its last rate hike, according to a former board member.

The Bank of Japan and the Federal Reserve are the biggest variables driving trading, said Taosha Wang, portfolio manager at Phil Asia Holdings. “For the U.S., I don’t think the market has agreed — either on a recession, which we think is excessive, or a soft landing,” she said in an interview with Bloomberg Television’s Yvonne Mann and David Engels on Monday.

A turbulent week for global bond markets eased on Friday as concerns about a potential economic slowdown in the United States — which sent Treasury prices soaring and briefly sent the market into a tailspin — faded.

The U.S. consumer price index is expected to rise 0.2% from June on Wednesday for both the headline figure and the so-called core measure that excludes food and energy. However, the modest moves may not be enough to deter the Federal Reserve from a widely expected interest rate cut next month.

Over the weekend, Federal Reserve Governor Michelle Bowman said she still sees upside risks to inflation and continued strength in the labor market, suggesting she may not be ready to support a rate cut when U.S. central bankers meet in September. Financial markets have fully priced in a rate cut in September and about 100 basis points of easing this year, according to swaps data compiled by Bloomberg.

In commodities, oil prices rose on Monday, extending last week’s 4.5% gain. Some major U.S. refiners are scaling back operations at their facilities this quarter, adding to concerns about a global glut of crude. Gold prices fell.

Some of the main events this week:

India CPI, Industrial Production, Monday
Consumer Confidence in Australia, Tuesday
Japan Producer Price Index, Tuesday
Unemployment in South Africa, Tuesday
UK unemployment claims, unemployment, Tuesday
Home Depot Earnings Tuesday
US Producer Price Index, Tuesday
Atlanta Fed President Raphael Boucek speaks Tuesday
Eurozone GDP, Industrial Production, Wednesday
New Zealand Interest Rate Decision, Wednesday
South Korea’s unemployment rate, Wednesday
Poland CPI, Wednesday
UK CPI, Wednesday
US CPI, Wednesday
Unemployment in Australia Thursday
Japan GDP, Industrial Production, Thursday
Philippines Interest Rate Decision, Thursday
China housing prices, retail sales, industrial production, Thursday
Norway interest rate decision, Thursday
UK Industrial Production, GDP, Thursday
US Initial Jobless Claims, Retail Sales, Industrial Production, Thursday
St. Louis Federal Reserve President Alberto Musallam and Philadelphia Federal Reserve President Patrick Harker speak Thursday.
Alibaba Group Walmart Earnings Thursday
Hong Kong unemployment rate, GDP, Friday
Taiwan GDP, Friday
U.S. housing starts, University of Michigan consumer confidence index, Friday
Chicago Fed President Austin Goolsbee speaks Friday

Some key movements in the markets:

Stocks

S&P 500 futures were little changed as of 12:45 p.m. Tokyo time.
Nikkei 225 (OSE) futures rose 0.7%.
Australia’s S&P/ASX 200 rose 0.5%
Hong Kong’s Hang Seng Index was little changed.
The Shanghai Composite Index was little changed.
Euro Stoxx 50 futures rose 0.6%.

Currencies

The Bloomberg Dollar Index was little changed.
The euro was little changed at $1.0915.
The Japanese yen fell 0.3% to 147.06 yen per dollar.
The offshore yuan fell 0.1% to 7.1832 against the dollar.
The Australian dollar rose 0.1% to $0.6585.

Cryptocurrencies

Bitcoin was little changed at $58,527.48.
Ether fell 0.6% to $2,541.2

Bonds

Goods

West Texas Intermediate crude rose 0.3% to $77.04 a barrel.
Spot gold fell 0.2% to $2,427.25 an ounce.

This story was produced with the help of Bloomberg Automation.

–With the assistance of Richard Henderson.