Shares in Asia rose after US stocks rallied and Treasury yields retreated following lackluster economic reports that support the case for the Federal Reserve to pause interest rate hikes.
Shares opened higher in Japan and Australia while Hong Kong equity futures also rose, echoing a rally in US equities. The S&P 500 closed 1.1% higher, its best day since June, while the Nasdaq 100 rose 1.6%. Those gains were compounded in early Asia trading as futures contracts for the two benchmarks jumped on bullish earnings from Nvidia Corp.
The chip-maker, a major constituent of both US benchmarks, rose in extended trading following earnings that forecast quarterly sales to reach $16 billion, eclipsing the $12.5 billion anticipated by analysts.
Australia and New Zealand bond yields fell after Treasury yields retreated across the curve Wednesday. The 10-year yield fell 13 basis points after touching a 2007 high this week, while the policy-sensitive two-year yields declined eight basis points to below 5%.
Those moves were helped along by US flash purchasing managers index data for August that came in softer than expected, echoing underwhelming eurozone data.
“In terms of the economic data, it look like bad news is good news for the market,” said Grace Tam, chief investment advisor, Hong Kong, for BNP Paribas Wealth Management on Bloomberg Television. “In terms of PMIs in the US and Europe, it’s good news for the market because they are now expecting no more rate hikes in the future. This is a tail wind for AI and tech stocks.”
Jackson Hole
The drop in yields weighed on the greenback and comes ahead of Powell’s speech on Friday at the Jackson Hole symposium.
The Fed chair is expected to outline the final steps in the central bank’s inflation-fighting campaign following weeks of pressure on stocks and government bonds, which has increased borrowing costs for businesses and households.
“The recent surge in bond yields has pushed up mortgage and corporate borrowing rates, contributed to the fall in stock prices, and generated upward pressures on the dollar,” said Krishna Guha, vice chairman at Evercore ISI. “The Fed will have to consider the tightening in financial conditions when setting rates in coming months, including the decision on whether to hike in September.”
US mortgage applications for home purchases tumbled to an almost three-decade low. A US government report also said that job growth in the year through March will probably be revised down by around 300,000.
In Asia, investors will be keenly watching the daily People’s Bank of China yuan fixing after record levels of official support for the currency, which has weakened on China’s economic outlook. The country’s $2.9 trillion trust industry is also showing signs of strain, adding further pressure on the economy.
The Bank of Korea and Bank of Indonesia are expected to keep interest rates unchanged in policy decisions due today.
Meituan and China CITIC Bank Corp are among the Chinese blue-chips to release earnings, while in Australia, Qantas Airways reported a record annual profit.
Elsewhere in corporate news, Esmark Inc. said it won’t make a takeover offer for US Steel Corp. and WeWork Inc. is rounding up advisers for help with a restructuring as it struggles with a heavy debt load, according to people with knowledge of the matter.
In commodities, crude oil declined while gold edged higher.
Key events this week:
- US initial jobless claims, durable goods, Thursday
- Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
- Japan Tokyo CPI, Friday
- US University of Michigan consumer sentiment, Friday
- Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.5% as of 9:31 a.m. Tokyo time. The S&P 500 rose 1.1%
- Nasdaq 100 futures rose 0.9%. The Nasdaq 100 rose 1.6%
- Nikkei 225 futures (OSE) rose 0.6%
- Japan’s Topix rose 0.2%
- Australia’s S&P/ASX 200 rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0870
- The Japanese yen was little changed at 144.70 per dollar
- The offshore yuan was little changed at 7.2822 per dollar
- The Australian dollar was little changed at $0.6482
Cryptocurrencies
- Bitcoin fell 0.4% to $26,484.08
- Ether fell 0.2% to $1,680.81
Bonds
- The yield on 10-year Treasuries was little changed at 4.19%
- Australia’s 10-year yield declined nine basis points to 4.11%
Commodities
- West Texas Intermediate crude fell 0.3% to $78.63 a barrel
- Spot gold rose 0.2% to $1,918.65 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.
