Beijing pledge saves China stocks from Asian slump: Markets wrap

Chinese shares rallied after authorities intensified rescue efforts, defying broader weakness in Asia as hopes ebbed for a swift Federal Reserve pivot toward policy easing.

The Hang Seng Index rose 2% while the mainland benchmark of CSI 300 was up 1.8%. The gains came after Beijing took more steps to stem a stock rout, such as widening trading curbs on investors including quantitative funds. A pledge by the nation’s sovereign wealth fund to further increase holdings of exchange-traded funds also lifted investor mood.

In contrast, equities in Japan, Australia and South Korea fell, while US equity futures were steady after the S&P 500 dropped 0.3% and the Nasdaq 100 shed 0.2% Monday.

“Right now the market is looking for clearer signals on the economic recovery,” Marcella Chow, global market strategist for JPMorgan Asset Management, said on Bloomberg Television regarding China. “Expectations remain quite low — markets and investors are still grappling with the weak economic recovery.”

The 10-year Treasury yield fell three basis points in Asian trading. That followed another bout of heavy selling Monday, spurred by strong US economic data, that pushed the rate up by 14 basis points, marking the biggest two-day jump since June 2022.

The Treasuries selloff on Monday came after the Institute for Supply Management’s services gauge hit a four-month high while prices picked up. The news jolted trading when investors were already digesting cautious views from some Fed speakers including Jerome Powell.

The net effect is a stronger economy that gives the central bank longer to reduce rates. Fed swaps almost wiped out the odds of a March rate move, and the chances of a May cut have also been reduced.

The “one-two punch” prevented market players from achieving further upside, according to Jose Torres at Interactive Brokers. JPMorgan Chase & Co. strategist Marko Kolanovic said that “absent a material shock, we think this year’s easing will prove more moderate than markets have priced.”

Australian and New Zealand yields were moderately higher. The Australian dollar strengthened after the Reserve Bank of Australia said a further increase in interest rates can’t be ruled out as it held the policy rate steady Tuesday as expected.

The dollar was steady after it hit its strongest since November in a muted start to trading in currency markets. The yen was little changed at just above 148 per dollar.

Annual wage negotiations in Japan have kicked off in earnest, as its central bank looks for evidence of a virtuous wage-price cycle that would allow it to exit from the world’s last negative rate regime.

In the US, Fed Bank of Minneapolis President Neel Kashkari said officials have time to gauge incoming data before easing while his Chicago counterpart Austan Goolsbee reiterated he’d like to see more of the favorable inflation data.

The world’s major central banks mustn’t drop their guard in the fight against inflation as it’s too soon to say if sharp interest rate increases have contained underlying price pressures, the OECD said. Meantime, the latest Bloomberg Markets Live Pulse survey showed American shoppers won’t be deterred by mounting credit-card bills or the recent ripple of layoffs. More than half of 463 respondents said spending will stay strong or get even stronger in 2024.

“The ongoing strength of the US economy relative to most of its G-10 peers is one of the key reasons why we have held a counter consensus bullish view on the USD since September 2023,” said Dominic Bunning at HSBC.

Elsewhere, gold inched higher to trade at around $2,027 per ounce. West Texas Intermediate was slightly higher. Bitcoin edged higher at above $42,500.

Key events this week:

• Reserve Bank of Australia’s rate decision, Tuesday
• Eurozone retail sales, Tuesday
• Germany factory orders, Tuesday
• UBS earnings, Tuesday
• Bank of Canada Governor Tiff Macklem speaks, Tuesday
• Fed’s Loretta Mester and Patrick Harker speak, Tuesday
• Germany industrial production, Wednesday
• Walt Disney earnings, Wednesday
• Fed’s Adriana Kugler and Tom Barkin speak, Wednesday
• China PPI, CPI, Thursday
• US wholesale inventories, initial jobless claims, Thursday
• Treasury Secretary Janet Yellen speaks at a Senate banking committee hearing on the Financial Stability Oversight Council annual report, Thursday
• Pharma CEOs speak at a Senate panel on prescription drug prices, Thursday
• ECB Chief Economist Philip Lane speaks, Thursday
• ECB publishes economic bulletin, Thursday
• US CPI revisions, Friday
• Germany CPI, Friday
• President Joe Biden hosts German Chancellor Olaf Scholz at the White House, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 12:39 p.m. Tokyo time
• Nasdaq 100 futures rose 0.2%
• Japan’s Topix fell 0.9%
• Australia’s S&P/ASX 200 fell 0.7%
• Hong Kong’s Hang Seng rose 2.1%
• The Shanghai Composite rose 0.8%
• Euro Stoxx 50 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0747
• The Japanese yen was little changed at 148.62 per dollar
• The offshore yuan rose 0.1% to 7.2116 per dollar

Cryptocurrencies

• Bitcoin rose 1.1% to $42 816.93
• Ether rose 1.3% to $2 315.89

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.13%
• Japan’s 10-year yield advanced one basis point to 0.725%
• Australia’s 10-year yield advanced six basis points to 4.16%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.