Asian Equities Advance, Yen Gives Up Some Gains: Markets Wrap

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(Bloomberg) — Asian stocks rose Monday as markets turned their focus to key U.S. data this week for more insights into the health of the world’s largest economy, while the yen pulled further away from a seven-month high touched last week.

Stocks in Australia and South Korea rose, while Hong Kong futures fell. U.S. stock futures were little changed in early Asian trading, after the S&P 500 rose 0.5% on Friday. Japan was closed for a public holiday.

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Calm returned after markets were roiled early last week by fears the Federal Reserve would cut interest rates quickly and aggressively to avoid a deep recession. The Cboe Volatility Index — a gauge of Wall Street fear — retreated from its highest level since the early days of the Covid-19 pandemic. The yen fell 0.2% against the U.S. dollar on Monday, after rising a week ago as traders cut bearish bets in the wake of the Bank of Japan’s rate hike.

With investors focused on the possibility of a recession in the United States, markets will be sensitive to data showing weakness in consumer prices, producer prices and retail sales, said Chris Weston, head of research at Pepperstone Group in Melbourne. “The market remains nervous and will seek to re-engage in recession trades with cries that the Fed is ‘behind the curve’ if the data shows further weakness,” Weston said.

Elsewhere in Asia, traders will focus on China’s one-year medium-term lending rate, as well as 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 bonds to support yields. Sovereign yields rebounded last week after authorities stepped up their fight against bond rallies. The economy needs more stimulus as the latest leading indicators point to a loss of recovery momentum midway through the year, according to Bloomberg Economics.

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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, while Treasuries were closed in Asia for a holiday in Japan.

economic recession

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.

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“If you forget the noise earlier in the week, this looks like a good place to settle in. It’s a nervous market,” Brian Whelan, chief investment officer and general portfolio manager at TCW Group, told Bloomberg Radio.

In commodities, oil prices were steady on Monday after rising 4.5% last week. Some major U.S. refiners are cutting operations at their facilities this quarter, adding to concerns about a global surplus of crude. Gold prices were little changed.

Some of the main events this week:

• Reserve Bank of Australia Deputy Governor Andrew Hauser speaks on Monday
• 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

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Some key movements in the markets:

Stocks

• S&P 500 futures were little changed as of 9:27 a.m. in Tokyo.
• Hang Seng futures were little changed.
• Australia’s S&P/ASX 200 rose 0.7%
• Euro Stoxx 50 futures were little changed.

Currencies

• The Bloomberg Dollar Index was little changed.
• The euro remained unchanged at $1.0917.
• The Japanese yen fell 0.2% to 146.93 yen per dollar.
• The offshore yuan was little changed at 7.1768 against the dollar.
• The Australian dollar was little changed at $0.6576.

Cryptocurrencies

• Bitcoin rose 0.3% to $58,689.31
• Ether fell 0.1% to $2,555.2

Bonds

• The yield on the 10-year Australian bond was little changed at 4.05%.

Goods

• West Texas Intermediate crude was little changed.
• Spot gold fell 0.2 percent to $2,427.61 per ounce.

This story was produced with the help of Bloomberg Automation.

—With the assistance of Richard Henderson.

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