Stocks in Asia advanced as traders bet that China’s latest property stimulus measures will aid the economy and data suggested that US interest rates may be approaching a peak.
Hong Kong benchmark indexes outperformed the region as investors resumed trading after a closure on Friday. Real estate stocks extended their advance, with a Chinese property shares gauge rising above 7% on stimulus measures taken to bolster the sector. Other major indexes also gained, while US markets are shut Monday for the Labor Day holiday.
Futures for European equities rose and those for the US steadied after the S&P 500 Index had its best week since June last week. West Texas Intermediate crude oil steadied after hitting the highest level since November on expectations that supply cuts by OPEC+ leaders will tighten the market. Brent remained near $90 a barrel.
The Chinese government last week said it will allow the nation’s largest cities to cut down payments for home buyers and encouraged lenders to lower rates on existing mortgages. The nationwide minimum down payment will be uniformly set at 20% for first-time buyers and 30% for second-time purchasers. Beijing and Shanghai followed through by lowering mortgage requirements for some homebuyers, while home transactions in China’s biggest cities soared over the weekend.
The recent measures have the potentials to “help restore homebuyers’ sentiment, moderately alleviate household interest payment pressure and pave the way for 4Q sales pick-up beyond seasonality,” according to Yi Wang, an analyst at Goldman Sachs Group Inc.
Sentiment was further propped up by news that distressed Chinese builder Country Garden Holdings Co. won approval from creditors over the weekend to extend a maturing yuan bond. Its shares jumped. However, the developer has just days to avoid default on some dollar bonds.
The dollar edged lower after gaining Friday against major peers. There is no trading of cash Treasuries due to the US holiday.
Cooling
This year’s US stock market rally is strong enough to withstand another leg higher for bond yields, according to the latest Markets Live Pulse survey. Also, just over 50% of survey takers expect the positive relationship between equities and bonds to turn negative by the end of this year, reverting to the long-term trend of this century.
Friday’s US jobs report showed a labor market undergoing a controlled cooling, illustrated by solid hiring, slower earnings growth and more people returning to the workforce. The moderation gives the Fed room to pause rate increases this month while keeping options open for another hike later in the year.
Meanwhile, some of the world’s largest bond investors are betting that the tightening cycle is finally ending in the US with cracks showing in the labor market.
The jobs data leaves “the bond market comfortable with the view that the Fed is on hold for now and maybe done for the cycle,” said Michael Cudzil, a portfolio manager at Pacific Investment Management Co., which oversees $1.8 trillion. BlackRock Inc.’s Jeff Rosenberg called a “screaming buy” in favor of owning policy-sensitive two-year Treasuries.
Traders will also be monitoring China’s trade and inflation data due later this week that will likely signal that the economy’s recovery remains fragile, keeping pressure on policymakers to roll out more stimulus.
Key events this week:
- Labor Day holiday in US and Canada, Monday
- ECB President Christine Lagarde makes speech at seminar organized by the European Economics & Financial Center, Monday
- Australia current account, rate decision, Tuesday
- Japan household spending, Tuesday
- China Caixin services PMI, Tuesday
- Eurozone S&P Global Eurozone Services PMI, PPI, Tuesday
- US factory orders, Tuesday
- ECB President Christine Lagarde chairs panel focused on central banks and international sanctions at ECB Legal Conference, Tuesday
- Australia GDP, Wednesday
- Eurozone retail sales, Wednesday
- Germany factory orders, Wednesday
- US trade, Wednesday
- Canada rate decision, Wednesday
- Bank of England Governor Andrew Bailey testifies to the UK parliament’s Treasury Select Committee, Wednesday
- Federal Reserve issues Beige Book economic survey, Wednesday
- Boston Fed President Susan Collins speaks on the economy at New England Council, Wednesday
- China trade, forex reserves, Thursday
- Eurozone GDP, Thursday
- US initial jobless claims, Thursday
- Bank of Canada Governor Tiff Macklem to speak on the Economic Progress Report, Thursday
- New York Fed President John Williams participates in moderated discussion at the Bloomberg Market Forum, Thursday
- Atlanta Fed President Raphael Bostic speaks on economic outlook at Broward College, Thursday
- Japan GDP, Friday
- France industrial production, Friday
- Germany CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 6:39 a.m. London time. The S&P 500 rose 0.2% on Friday
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.1%
- Japan’s Topix rose 0.8%
- Australia’s S&P/ASX 200 rose 0.5%
- Hong Kong’s Hang Seng rose 2.2%
- The Shanghai Composite rose 1%
- Euro Stoxx 50 futures rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0787
- The Japanese yen was little changed at 146.15 per dollar
- The offshore yuan was little changed at 7.2657 per dollar
- The Australian dollar rose 0.2% to $0.6471
- The British pound rose 0.2% to $1.2611
Cryptocurrencies
- Bitcoin fell 0.3% to $25,959.2
- Ether fell 0.4% to $1,636.43
Bonds
- Japan’s 10-year yield advanced two basis points to 0.645%
- Australia’s 10-year yield advanced eight basis points to 4.09%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold rose 0.3% to $1,944.95 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from John Cheng.
