Asian shares advanced for a third day, led by gains Chinese equities, amid relative calm and positive sentiment across financial markets.
(Bloomberg) — Asian shares advanced for a third day, led by gains Chinese equities, amid relative calm and positive sentiment across financial markets.
An Asia-Pacific stocks index reached the highest level in more than two weeks, with energy and materials companies leading the way. The dollar edged lower versus its major peers and Treasury yields were little changed.
Japan’s Topix declined as traders there returned from national holidays, with a gauge of bank shares falling about 1%.
In Australia, shares of Westpac Banking Corp. rose around 2% after it reported first-half net profit that was slightly ahead of analyst estimates. Shares of Chinese banks also climbed after at least three nationwide lenders lowered deposit rates.
Contracts for US equities edged lower following a strong performance on Wall Street Friday, when the S&P 500 halted its longest losing streak since February. The benchmark climbed 1.9% as US regional banks rebounded while the VIX volatility gauge snapped a four-day surge.
The Nasdaq 100 rose 2.1%, with strong earnings at Apple Inc. helping lift the megacap tech space as the world’s most-valuable company climbed almost 5%.
US jobs data last week showed hiring and worker pay gains accelerated in April in signs of labor-market resilience and inflationary pressures in the face of headwinds. The solid data has tempered fears of a US recession.
The strong figures also increase chances the Federal Reserve will hold rates higher for longer and potentially keep the door open to an 11th straight hike in June.
Rates on swap contracts linked to Fed meetings — which on Thursday briefly priced in a cut in July — moved higher, to levels consistent with a stable policy rate until September — followed by at least two quarter-point cuts by year-end.
“Unless we see a sharp turnaround in the inflation numbers, the Fed ought to be quite comfortable with where policy rates are right now,” Tai Hui, chief Asia market strategist at JPMorgan Asset Management, said on Bloomberg Television.
Worries Remain
Declines in Japanese financial stocks reflected rising interest rates, according to Michael Makdad, a senior analyst at Morningstar Inc. “In that sense, I think the weakest link in Asia is the Japanese banks,” including the nation’s regional banks and other unlisted lenders, he said.
Despite Friday’s stock rebound, investors still have much to worry about. The rout in US bank shares has the S&P 500 financials index on the verge of falling back below its 2007 peak.
Meanwhile, Treasury Secretary Janet Yellen sees “simply no good options” for solving the debt limit stalemate in Washington without Congress lifting the cap. She even cautioned that resorting to the 14th Amendment would provoke a constitutional crisis.
“We see a chance that Treasury’s cash amount is enough to sustain till mid-June and probably slightly beyond that,” Oversea-Chinese Banking Corp. strategists Frances Cheung and Christopher Wong wrote in a note. However, “the irregular nature of fiscal receipts and outlays shall render investors staying cautious.”
Investors are also awaiting the release this week of the core consumer price index, which excludes food and energy and is closely watched by the Fed. It is projected to show a 5.5% increase in April from a year ago.
In Asia, attention will swing to China’s trade figures due in the first half of the week and inflation numbers set for release on Thursday.
Elsewhere in markets, oil ticked higher as investors assessed a complex outlook for global demand after a period of volatile trading. Gold gained.
Key events this week:
- US wholesale inventories, Monday
- US President Joe Biden scheduled to meet with congressional leaders on debt limit, Tuesday
- New York Fed President John Williams speaks to Economic Club of New York, Tuesday
- US CPI, Wednesday
- China PPI, CPI, Thursday
- UK BOE rate decision, industrial production, GDP, Thursday
- US PPI, initial jobless claims, Thursday
- Group of Seven finance minister and central bank governors meet in Japan, Thursday
- US University of Michigan consumer sentiment, Friday
- Fed Governor Philip Jefferson and St. Louis Fed President James Bullard participate in panel discussion on monetary policy at Stanford University, Friday.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 1:35 p.m. Tokyo time. The S&P 500 rose 1.9% Friday.
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 2.1%
- Japan’s Topix index fell 0.2%
- Hong Kong’s Hang Seng Index rose 0.8%
- China’s Shanghai Composite Index rose 1.6%
- Australia’s S&P/ASX 200 Index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.1042
- The Japanese yen was little changed at 134.79 per dollar
- The offshore yuan was little changed at 6.9191 per dollar
- The Australian dollar rose 0.4% to $0.6775
Cryptocurrencies
- Bitcoin fell 2.4% to $28,248.6
- Ether fell 2.8% to $1,866.45
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.42%
- Japan’s 10-year yield declined 0.5 basis point to 0.415%
- Australia’s 10-year yield advanced seven basis points to 3.39%
Commodities
- West Texas Intermediate crude rose 0.5% to $71.69 a barrel
- Spot gold rose 0.4% to $2,024.17 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Cheng.
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