Shares in Asia fluctuated as investors digested the latest batch of economic reports from China, while Treasuries extended Wednesday’s gains in a sign of growing anticipation that the Federal Reserve is nearing the end of its tightening cycle.
Equity benchmarks for mainland China and Hong Kong fell after manufacturing activity in China contracted again, albeit less than feared, while the services PMI showed slowing expansion. The offshore yuan and Australian dollar pared earlier gains against the greenback.
The latest signs of weakness in the world’s second largest economy were accompanied by further signs of official support. The People’s Bank of China met with lenders and private businesses to discuss improving their access to funding.
China builders including Country Garden Holdings Co rallied as tier-one cities Guangzhou and Shenzhen relaxed home-purchase restrictions. Shares in Baidu Inc. and SenseTime Group Inc., which received approval to roll out generative artificial intelligence services, advanced.
“The problems China have now are deep-seated, structural ones,” said Rob Subbaraman, chief economist and head of global markets research for Nomura Singapore Limited, on Bloomberg Television. “It’s not clear to us that these piecemeal policy measures are really enough to revive the economy. We remain cautious.”
Elsewhere in Asia, shares in Japan rallied while Australian equities were flat and South Korean stocks fell. About three stocks declined for every two that advanced on the MSCI Asia-Pacific Index, which posted a small gain.
US equity futures were also flat. The S&P 500 advanced for a fourth day Wednesday, extending this week’s gains to 2.5%, while the tech-heavy Nasdaq 100 has climbed 3.5% this week.
The recent stock gains have only partly unwound broad-based losses for August. The S&P 500 is still heading for the worst month since February, while the Nasdaq 100 is set for the largest decline this year. Asian and global stocks are also on pace for the biggest monthly losses since February.
Treasury yields inched lower after small declines Wednesday, helped by the weaker-than-expected data. US gross domestic product rose at a 2.1% annualized pace in the second quarter, lower than the government’s previous estimate. An industry gauge of employment showed fewer jobs were added than economists forecast, while a measure of consumer confidence was also softer than expected. Australian and New Zealand bond yields also fell.
The underwhelming US data supported predictions for the Fed to ease back on interest-rate hikes. Swap contracts are now pricing in less than a 50% chance of another quarter-point increase this year. The dollar retreated slightly, while the yen strengthened.
Bad is good
“Investors are reacting with a ‘bad news is good news’ approach, betting that a slowing economy will lead to a less aggressive Federal Reserve,” said Mark Hackett, chief of investment research at Nationwide Funds Group. “This has calmed investors, but adds an element of risk if the pendulum continues to swing, as an earnings recovery is critical for a continued strong market.”
In US corporate news, Apple is testing the use of 3D printers to produce smartwatch components, according to people with knowledge of the matter. US prosecutors are investigated a Tesla Inc. plan to purchase hard-to-get construction materials. Visa Inc. and Mastercard Inc. shares rose on plans to boost the fees charged to retailers.
The price of oil erased an earlier increase after ending Wednesday with its fifth daily advance. Gold edged higher after a string of gains this week. Bitcoin traded above $27,000.
Key events this week:
- Eurozone CPI, unemployment, Thursday
- ECB publishes account of July monetary policy meeting, Thursday
- US personal spending and income, initial jobless claims, Thursday
- China Caixin manufacturing PMI, Friday
- Eurozone S&P Global Eurozone Manufacturing PMI, Friday
- South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
- Boston Fed President Susan Collins speaks at virtual event, Friday
- US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday
Some of the main moves in markets:
- S&P 500 futures were little changed as of 2:03 p.m. Tokyo time. The S&P 500 rose 0.4%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.6%
- Japan’s Topix rose 1%
- Australia’s S&P/ASX 200 was little changed
- Hong Kong’s Hang Seng fell 0.3%
- The Shanghai Composite fell 0.5%
- Euro Stoxx 50 futures were little changed
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0919
- The Japanese yen rose 0.2% to 145.92 per dollar
- The offshore yuan was little changed at 7.2973 per dollar
- Bitcoin was little changed at $27,253.52
- Ether fell 0.1% to $1,702.22
- The yield on 10-year Treasuries was little changed at 4.11%
- Japan’s 10-year yield was little changed at 0.645%
- Australia’s 10-year yield declined three basis points to 4.04%
- West Texas Intermediate crude was little changed
- Spot gold rose 0.2% to $1 945.85 an ounce