Stocks, futures gain; yuan drops on rule changes: markets wrap

US and European futures advanced as a surge in Chinese shares led most Asian equities higher Monday. The offshore yuan fell after policy makers acted to restrain its strength by making it easier to bet against.

Chinese stocks gained as investors mulled an expected visit by President Xi Jinping to Shenzhen this week amid optimism he could unveil plans to further open parts of the economy to foreign investment. Shares in Hong Kong also climbed, with a more modest rise seen in South Korea and Australia. MSCI Inc.’s gauge of Asia Pacific stocks hit its highest since June 2018.

Meanwhile, the yuan fell as much as 0.7% against the dollar, which ticked higher against major peers. Japanese equities bucked the trend and retreated. Crude oil declined. Treasuries won’t trade Monday due to a US holiday.

China’s central bank is taking steps to restrain the yuan’s rally while stopping short of encouraging declines, a sign that officials are willing to tolerate some currency strength. Financial institutions will no longer need to set aside cash when buying foreign exchange for clients through currency forwards.

“We still see scope for further yuan appreciation, especially with China’s strong growth momentum, wide yield differential and strong inflows in part due to index inclusion,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore. “But the authorities want to encourage more two-way flows, and removing the reserve requirement will help.”

Elsewhere, the US stimulus saga rolls on, with President Donald Trump and House Speaker Nancy Pelosi blaming each other for a lack of progress on a deal. Trump trails Joe Biden by 12 points in a national poll of likely voters a little more than three weeks before Election Day, according to a Washington Post/ABC News poll released on Sunday.

“Markets that once feared a Democratic sweep now appear to be hoping that the Democrats do take control of the Senate, with the polling leads for Biden boosting optimism for greater stimulus,” said Ben Emons, managing director for global macro strategy at Medley Global Advisors.

Trump was cleared by his doctor and is no longer considered a coronavirus transmission risk to others, meeting the criteria to end self-isolation, his physician Sean Conley said. The virus continued its unrelenting spread in Europe, with France posting another daily infection record and Germany reporting the most Covid-related deaths since May.

Here are some key events coming up:

• Monday is the Columbus Day holiday in the US.
• UK Prime Minister Boris Johnson set a deadline of Thursday to thrash out the outline of an EU trade deal.
• Earnings from JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc. and Johnson & Johnson are due this week.
• IMF/World Bank meetings continue.

These are the main moves in markets:

Stocks

• S&P 500 futures rose 0.4% as of 7 a.m. in London. The gauge rose 0.9% on Friday.
• Japan’s Topix fell 0.2%.
• Hong Kong’s Hang Seng Index gained 2.2%.
• Shanghai Composite Index advanced 2.4%.
• South Korea’s Kospi index added 0.4%.
• Australia’s S&P/ASX 200 Index rose 0.5%.
• Euro Stoxx 50 futures gained 0.6%.

Currencies

• The offshore yuan fell 0.4% to 6.7150 per dollar.
• The Bloomberg Dollar Spot Index was flat.
• The yen was steady at 105.48 per dollar, up 0.1%.
• The euro bought $1.1822.
• The Aussie fell 0.1% to 72.32 US cents.

Bonds

• The yield on 10-year Treasuries ended last week at 0.77%.
• Australia’s 10-year yield remained at 0.85% on Monday.

Commodities

• West Texas Intermediate crude fell 0.9% to $40.25 a barrel.
• Gold was at $1,930.65 an ounce.