Asian equities rose, with shares in Hong Kong leading gains as investors grew more optimistic about a further easing in China’s Covid restrictions.
(Bloomberg) — Asian equities rose, with shares in Hong Kong leading gains as investors grew more optimistic about a further easing in China’s Covid restrictions.
Chinese tech firms listed in Hong Kong jumped as much as 4.4% while the MSCI Asia Pacific Index headed for a third weekly gain. Goldman Sachs strategists upgraded Hong Kong stocks to market-weight on bets for a reopening of China’s economy.
China also reduced the amount of its short-term cash injections to the banking system, as the nation’s government bond market steadied following this week’s steep losses.
Stocks edged higher in Japan, Australia as well as South Korea, suggesting little reaction to news that North Korea had launched a missile.
Treasury yields held gains across the curve during morning trading in Asia after the previous day’s jump when St. Louis Fed President James Bullard said policymakers should increase interest rates to at least 5% to 5.25% to curb inflation. He also warned of further financial stress ahead. Bond yields in Australia and New Zealand followed suit.
The dollar slipped after rallying on Thursday. Oil was poised for a weekly loss as concerns over a worsening demand outlook filtered through the crude market.
With inflation only starting to ease and a gauge of US retail sales increasing at the fastest pace in eight months, Fed speakers in recent days have emphasized that they need to go further to extinguish prices pressures. Bullard’s comments came a day after San Francisco Fed President Mary Daly said a pause in rate hikes was “off the table.” Their hawkish tone was echoed by Minneapolis Fed President Neel Kashkari on Thursday afternoon.
“The market believes that inflation is on the down trend. We also believe that, but the fact of inflation having peaked is not a reason for the Fed to turn and cut rates,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said on Bloomberg Radio. “That’s the fundamental disconnect that still exists between the Fed and the market.”
On Thursday, fresh data showing weekly jobless claims came in below the forecast further underscored the strength of the labor market. US mortgage rates posting their biggest weekly decline since 1981 briefly improved sentiment, even though Freddie Mac’s chief economist said there’s a long road ahead for the housing market.
If the Fed keeps increasing at the current pace, “by the time they get the information that they’ve been successful in slowing the economy and slowing inflation, it might be too late,” Ellen Hazen, chief market strategist at F.L.Putnam Investment Management, said on Bloomberg Television. “It’s just too soon to know exactly how this is going to play through the economy and that’s the biggest risk.”
Read More: Bullard Sets Tone for Fed Officials Signaling Hikes Will Roll On
In Japan, inflation hit its fastest clip in 40 years in October. The outcome puts the Bank of Japan in an even more awkward position as it tries to explain the need to stick with monetary stimulus to pursue stable price growth.
Key events this week:
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 12:04 p.m. in Tokyo. The S&P 500 fell 0.3%
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.2%
- Japan’s Topix index rose 0.3%
- South Korea’s Kospi index rose 0.5%
- Hong Kong’s Hang Seng Index rose 0.7%
- China’s Shanghai Composite Index fell 0.3%
- Australia’s S&P/ASX 200 Index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.0373
- The Japanese yen rose 0.3% to 139.81 per dollar
- The offshore yuan was little changed at 7.1456 per dollar
Cryptocurrencies
- Bitcoin rose 1.5% to $16,923.4
- Ether rose 1.8% to $1,227.77
Bonds
- The yield on 10-year Treasuries was little changed at 3.76%
- Australia’s 10-year yield was little changed at 3.62%
Commodities
- West Texas Intermediate crude rose 1% to $82.48 a barrel
- Spot gold rose 0.2% to $1,764.11 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rheaa Rao.
More stories like this are available on bloomberg.com
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