Stocks climb as China extends gains; yields fall: Markets wrap

Stocks in Asia advanced, with Chinese equities outperforming as traders awaited a raft of economic figures over the next few days for clues on the outlook for global central bank policies.

An Asian equity gauge rose 0.8%, supported by gains across major indexes in the region. The Hang Seng Index extended its increase into a second day and China’s stocks outperformed, with the Hang Seng China Enterprises Index rising more than 2%. Contracts for European and US shares edged higher after the S&P 500 posted its first back-to-back advance in August.

Chinese officials pledged Monday to strengthen policy support and speed up government spending, according to the official Xinhua News Agency.

“If policy measures continue to be unveiled in the coming weeks, the market narrative may shift from ‘too little, too late’ to a more confident stance as policymakers regain credibility,” UBS Global Wealth Management strategists including Solita Marcelli and Mark Haefele wrote in a note.

Treasury yields declined across tenors, with the two-year’s dropping more than five basis points to slightly below 5%. The auctions of two- and five-year Treasury notes Monday drew the highest yields since before the 2008 financial crisis, a reflection of the US bond-market selloff that deepened last week in anticipation of another rate increase by the Federal Reserve.

The dollar weakened against all of its Group-of-10 counterparts, while the yen was little changed at around 146.5 to the dollar.

Strategists at Goldman Sachs Group expect the yen to depreciate to levels last seen more than 30 years ago if the Bank of Japan sticks to its dovish stance. Over the next six months, the currency is projected to reach 155 per dollar — the weakest since June 1990, according to strategists led by Kamakshya Trivedi. They had previously expected the yen to trade to 135.

Meanwhile, traders will be monitoring consumer confidence data from the US later Tuesday for insights on the Fed’s monetary policy impact on the economy. Data this week also include US’ employment growth, which probably cooled, while wage increases moderated in August, suggesting a further tempering of inflation risks that reduces the urgency for another Fed rate hike.

US’s core PCE deflator and euro-area inflation readings will be in focus this week as well, while China’s PMI figures are expected to reinforce that the economy is going from bad to worse.

“This is going to be a critical week,” Jack McIntyre, a portfolio manager at Brandywine Global Investment Management, said on Bloomberg Television. “We’re going to get some key data points that will kind of give us the chance to sort of reevaluate portfolio positions and the Fed’s going to reevaluate their monetary policy if they’re doing the right thing.”

In commodities, oil traded around $80 per barrel as traders waited for the next set of clues on the outlook for crude demand in the US and China. Gold edged higher.

Key events this week:

• US Conference Board consumer confidence, Tuesday
• Eurozone economic confidence, consumer confidence, Wednesday
• US GDP, wholesale inventories, pending home sales, Wednesday
• China manufacturing PMI, non-manufacturing PMI, Thursday
• Japan industrial production, retail sales, Thursday
• 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:

Stocks

• S&P 500 futures rose 0.1% as of 6:30 a.m. London time. The S&P 500 rose 0.6%
• Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 0.7%
• Japan’s Topix rose 0.2%
• Australia’s S&P/ASX 200 rose 0.6%
• Hong Kong’s Hang Seng rose 2.1%
• The Shanghai Composite rose 1.2%
• Euro Stoxx 50 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0822
• The Japanese yen was little changed at 146.53 per dollar
• The offshore yuan was little changed at 7.2910 per dollar
• The Australian dollar rose 0.2% to $0.6444
• The British pound rose 0.1% to $1.2620

Cryptocurrencies

• Bitcoin rose 0.3% to $26,054.53
• Ether rose 0.2% to $1,649.81

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.19%
• Japan’s 10-year yield declined 1.5 basis points to 0.645%
• Australia’s 10-year yield declined two basis points to 4.12%

Commodities

• West Texas Intermediate crude fell 0.1% to $80 a barrel
• Spot gold rose 0.2% to $1 923.78 an ounce