Asian stocks climbed Thursday after the Federal Reserve paused monetary tightening and China’s central bank cut a key lending rate to support its struggling economy.
Hong Kong’s benchmark index and Japanese equities advanced. Australian shares recovered after initially paring gains on strong jobs data that bolstered the case for further interest rate hikes from the central bank.
The dollar rose while the offshore yuan extended losses and the yen dropped to the lowest level since November. The weakness in the Japanese currency prompted a warning from Chief Cabinet Secretary Hirokazu Matsuno that excessive movements weren’t desirable.
Treasury yields ticked higher. Australia’s sovereign yield curve inverted for the first time since the financial crisis as policy-sensitive three-year rates surged on the employment figures.
The S&P 500 had gained just 0.1% on Wednesday after Fed chief Jerome Powell said nearly all Fed officials expected it would be appropriate to raise interest rates “somewhat further” in 2023. The Nasdaq 100 rose 0.7%, bringing its gain since the start of the year to 37%.
With a pause and hawkish outlook from the Fed widely anticipated, much of the focus in the Asian trading session is on China. The People’s Bank of China cutting its medium-term lending facility rate paves the way for banks to lower lending rates next week.
The PBOC’s move also forms part of broader stimulus efforts to support real estate and domestic demand. Data showing retail sales slowed more than expected in May added to worries about further slowing in China. Industrial production was also lower but met consensus forecasts.
“They need a larger package, not just about the monetary policy or mortgage rate cut but also to restore the confidence of the private sector,” Raymond Yeung, Greater China Economist at ANZ Group Holdings Ltd., said in an interview with Bloomberg Television.
Economic troubles in New Zealand were also rippling through markets Thursday, with the nation’s sovereign bond yields falling after gross domestic product data showed the country fell into a recession in the first quarter following an aggressive run of policy tightening.
Elsewhere in markets, oil extended a drop driven by a surprise jump in US crude stockpiles and the Fed’s hawkish outlook.
Key events this week:
- European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday
- US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday
- Bank of Japan rate decision, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 12:20 p.m. Tokyo time. The S&P 500 rose 0.1%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 0.7%
- Japan’s Topix rose 0.5%
- Australia’s S&P/ASX 200 rose 0.3%
- Hong Kong’s Hang Seng rose 0.6%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0811
- The Japanese yen fell 0.7% to 141.04 per dollar
- The offshore yuan fell 0.1% to 7.1841 per dollar
- The Australian dollar was little changed at $0.6790
Cryptocurrencies
- Bitcoin rose 0.5% to $25,052.53
- Ether rose 0.7% to $1,649.13
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.82%
- Australia’s 10-year yield advanced three basis points to 4.01%
Commodities
- West Texas Intermediate crude fell 0.2% to $68.11 a barrel
- Spot gold fell 0.4% to $1,935.58 an ounce
This story was produced with the assistance of Bloomberg Automation.
