Dollar gains, Asian stocks rise amid China focus: markets wrap

The dollar strengthened on its appeal as a haven while Asian stocks climbed amid split market sentiment over the prospects of China easing its Covid-Zero stance. US and European equity futures edged lower.

Shares in Hong Kong advanced, quickly reversing initial declines, as investors looked beyond risks over virus policy to pile into Chinese tech and property companies. Benchmark gauges rose across Asia, putting the MSCI Asia Pacific Index on course for a one-month highest.

It was as different picture in currency markets, where the greenback strengthened against all of its Group-of-10 counterparts. The Australian and New Zealand dollars saw the largest drops given their sensitivity to the outlook for Chinese economic growth. The offshore yuan was weaker.

Oil and gold also remained down, but above their lows for the session.

Confidence was also damped after Apple Inc. said it expected to produce at least three million fewer iPhone 14 handsets than originally anticipated this year, according to people familiar with its plans.

Markets continue to be whiplashed as traders veer between hope of China reopening from Covid-19 and fear that harsh curbs will persist. Chinese officials on Saturday vowed to remain “unswervingly” strict in Beijing’s approach to stamping out the coronavirus. The nation’s shares had rallied aggressively on Friday on bets for an easing of virus curbs.

“Sentiment on Chinese stocks is so low that any potential catalyst would send stocks racing,” David Chao, global market strategist for Asia Pacific ex-Japan at Invesco Ltd. “Pent-up money sitting on the sidelines is chasing this rally. If you look at the stocks that have benefited, it’s the large-cap tech stocks and I’m not surprised.”

The debate over China’s outlook comes as investors contend with headwinds from Federal Reserve interest-rate hikes. US data Friday — showing strong hiring and wage increases along with higher unemployment — offered a mixed picture for Fed officials debating how long to extend their campaign to curb elevated inflation.

“Over the next three to four months, dollar will continue to keep moving higher,” Mahjabeen Zaman, head of FX research at Australia & New Zealand Banking Group Ltd., said on Bloomberg Television. “That’s really consistent with the recent FOMC Fed meeting we had where they said they’re going to slow the pace but push on peak rates.”

Two-year US yields, which are more sensitive to imminent policy moves, rose slightly Monday while 10-year yields ticked lower.

Markets will watch the latest US inflation reading on Thursday after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.

Key events this week:

• Fed officials Susan Collins, Loretta Mester and Tom Barkin speak at events, Monday
• Euro zone retail sales, Tuesday
• US midterm elections, Tuesday
• EIA oil inventory report, Wednesday
• China aggregate financing, PPI, CPI, money supply, new yuan loans, Wednesday
• US wholesale inventories, MBA mortgage applications, Wednesday
• Fed officials John Williams, Tom Barkin speak at events, Wednesday
• US CPI, US initial jobless claims, Thursday
• Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 6:37 a.m. London time. The S&P 500 rise 1.4% on Friday
• Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 1.6%
• Euro Stoxx 50 futures fell less than 0.1%
• The Topix Index rose 1%
• The Kospi index rose 1%
• The Hang Seng Index rose 3.2%
• The Shanghai Composite Index rose 0.3%
• S&P/ASX 200 Index rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.1% to $0.9946
• The Japanese yen fell 0.4% to 147.21 per dollar
• The offshore yuan fell 0.6% to 7.2268 per dollar
• The Australian dollar fell 0.6% to $0.6430

Cryptocurrencies

• Bitcoin fell 1.1% to $20,902.54
• Ether fell 1.2% to $1,585.65

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.15%
• Australia’s 10-year yield advanced five basis points to 3.90%

Commodities

• West Texas Intermediate crude fell 1.2% to $91.51 a barrel
• Spot gold fell 0.6% to $1 671.33 an ounce