Asian stocks steady; yuan rallies on PBOC support: Markets wrap

Initial enthusiasm about plans by China to boost private businesses gave way to skepticism, leaving Hong Kong stocks holding onto a fraction of their earlier gains. An Asian equity benchmark steadied.

The MSCI Asia Pacific Index was flat, after Hong Kong’s Hang Seng Index gave up almost all of its 1.4% advance. Japan equities and US futures fell. The yuan gained on signs of policy support and a more forceful central bank.

The latest pledge by Beijing to improve conditions for private businesses is failing to get traction in markets, with traders pointing to the lack of concrete measures. China’s efforts to revive growth, from cutting rates to closing out a regulatory crackdown on tech firms, have so far done little to support growth in the world’s second-largest economy.

Provided that Chinese authorities roll out a broader easing in the coming months, “there will be a quick turnaround in public sentiment in the Chinese market, and we can see portfolio flows back to China pretty quickly,” Chi Lo, senior market strategist for Asia Pacific at BNP Paribas Asset Management, said on Bloomberg Television.

The People’s Bank of China stepped in Thursday, setting its daily fixing of the yuan with the largest bias since November as it seeks to bolster a currency that has sunk more than 3% this year. The offshore yuan advanced 0.6% against the dollar and was the best performing currency in Asia.

“The PBOC may have to push back against yuan weakness for longer,” said Mingze Wu, a currency trader with StoneX Group in Singapore. “The silver lining is that China’s consumer market is extremely big and they are self sustainable if needed. So compared to many other countries that enact capital controls, China will be in a much better position to succeed in defending the yuan where everybody else fails.”

The dollar fell against all of its Group-of-10 counterparts and a gauge of the greenback extended its month-to-date weakness to more than 6% on the back of speculation that the Federal Reserve hiking cycle may have peaked as inflation eases.

The yen edged up. Data earlier showed Japan’s balance of trade swung unexpectedly to a surplus in June, the first since July 2021.

“The cooler inflation outlook and associated policy implications mean that the recent dollar selloff can extend in the near term, particularly against high carry EM FX currencies,” Goldman Sachs Group Inc. strategists including Jenny Grimberg wrote in a note. “That said, we maintain that broad dollar depreciation over the course of this year is likely to be shallow and subdued.”

Easing pressures

Evidence of easing price pressures in the US and UK is bolstering hopes among investors that a campaign of monetary tightening is drawing to a close.

Treasuries steadied after gaining Wednesday as British inflation dropped to the lowest in 15 months, adding to evidence central banks can go easier on raising interest rates. The increases, however, pared back as commodities spiked on a warning from Russia that any ships to Ukraine would be seen as carrying arms.

Meanwhile, investors will be watching results from Taiwan Semiconductor Manufacturing Co. due Thursday to further gauge demand in the semiconductor industry. Sales at the world’s largest supplier of made-to-order chips fell for a third month last month.

Futures for the S&P 500 and Nasdaq 100 ticked lower in Asia after Netflix Inc. declined in postmarket trading as sales missed estimates and its third-quarter forecast fell short. Tesla Inc. also fell after profitability shrank in the second quarter, a sign the electric-vehicle maker’s margins are being squeezed.

Elsewhere, oil steadied as persistent demand concerns and dollar strength were offset by drops in crude stockpiles in the US. Gold edged toward the highest since May.

Key events this week:

• US initial jobless claims, existing home sales, Conf. Board leading index, Thursday
• Japan CPI, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 1:15 p.m. Tokyo time. The S&P 500 rose 0.2%
• Nasdaq 100 futures fell 0.4%. The Nasdaq 100 was little changed
• Japan’s Topix index fell 0.6%
• Hong Kong’s Hang Seng Index rose 0.3%
• 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 0.3%
• The euro rose 0.2% to $1.1225
• The Japanese yen rose 0.3% to 139.23 per dollar
• The offshore yuan rose 0.7% to 7.1803 per dollar
• The Australian dollar rose 0.9% to $0.6834

Cryptocurrencies

• Bitcoin was unchanged at $29,966.89
• Ether fell 0.1% to $1,896.61

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.76%
• Japan’s 10-year yield declined 0.5 basis point to 0.455%
• Australia’s 10-year yield advanced nine basis points to 3.96%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold rose 0.4% to $1 985.18 an ounce