Asian stocks fluctuated as traders weighed better-than-expected China data against intensifying Middle East tensions. The Bank of Japan announced unscheduled bond purchases to stem a rise in yields.
Hong Kong’s Hang Seng China Enterprises Index pared losses as China’s economic growth and retail sales suggested the economy is founding a foothold. The report gave a brief boost across Asian stocks including Australia and South Korea, though mainland China’s benchmarks remained in the red.
The onshore and offshore yuan strengthened, crude oil extended gains and copper added 0.7%. An index of China’s property developers headed for its lowest since 2009, as stress in the sector continues to rise amid slumping home sales and deepening debt woes for major developers.
“Finally some decent data for the yuan. The retail spending beating expectations in particular is notable,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group. “The property sector remains weak, but overall today’s data provide an early sign that the various support measures may be starting to have an effect.”
The BOJ’s announcement came after Japan’s 10-year yield touched a fresh decade-high, following a jump in US yields. Japan’s sovereign debt has faced renewed selling pressure amid speculation that the central bank will tweak is ultra-easy monetary policy sooner rather than later.
Treasuries steadied in early Asian trading after two-year yields hit the highest since 2006 in the previous session as strong US data reinforced the higher-for-longer rates narrative. Swap contracts tied to Fed rate decisions showed traders are pricing in more than 60% odds that policymakers will raise interest rates by a quarter percentage point in January.
US retail sales exceeded all forecasts and industrial production strengthened last month, fresh evidence of a resilient American consumer whose spending is helping stabilize manufacturing. The reports prompted a slew of economists, from Goldman Sachs to JPMorgan Chase & Co. and Morgan Stanley, to boost their tracking estimates for third-quarter gross domestic product.
“There is a lot going on in the bond markets and the global geopolitics around the whole world,” Nancy Davis, founder and chief investment officer at Quadratic Capital Management, said on Bloomberg Television. “It’s hard to keep up with everything, but there is a lot of movement. The daily volatility that we’re seeing in the Treasury market is extreme.”
Back to geopolitical events. President Joe Biden’s dramatic war-time visit to Israel and Jordan began to unravel even before he left the ground, after an explosion at a Gaza hospital left hundreds dead and Arab leaders pulled out of a meeting planned for the trip. Oil extended gains to advance 2.4%, and gold edged up as middle east conflict bolstered haven demand.
Israel blamed a failed missile from militant group Palestinian Islamic Jihad for the blast, potentially the deadliest since the killing of 1,300 Israelis in the Oct. 7 attack by Hamas, which is designated a terrorist organization by the US and European Union. The Pentagon said it didn’t have information on who was responsible and the US called for an investigation.
Key events this week:
- UK CPI, Wednesday
- Eurozone CPI, Wednesday
- Morgan Stanley, Netflix, Tesla earnings, Wednesday
- Federal Reserve issues Beige Book economic survey, Wednesday
- Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
- Australia unemployment, Thursday
- Japan trade, Thursday
- China property prices, Thursday
- US initial jobless claims, existing home sales, leading index, Thursday
- Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 11:24 a.m. Tokyo time. The S&P 500 was little changed.
- Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.3%
- Hong Kong’s Hang Seng was little changed
- China’s Shanghai Composite fell 0.4%
- Japan’s Topix fell 0.2%
- Australia’s S&P/ASX 200 rose 0.2%
- Euro Stoxx 50 futures was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0576
- The Japanese yen was little changed at 149.71 per dollar
- The offshore yuan rose 0.2% to 7.3126 per dollar
- The Australian dollar rose 0.1% to $0.6373
Cryptocurrencies
- Bitcoin was little changed at $28,436.38
- Ether rose 0.5% to $1,568.35
Bonds
- The yield on 10-year Treasuries was little changed at 4.83%
- Australia’s 10-year yield advanced 10 basis points to 4.65%
Commodities
- West Texas Intermediate crude rose 2.6% to $88.92 a barrel
- Spot gold rose 0.9% to $1,940.59 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth, Tassia Sipahutar and Ran Li.
