Most Asian stocks rose Monday, weathering risks from China as well as a drop in US equity futures amid a reminder from Federal Reserve officials that interest rates need to go up to quell elevated inflation.
An Asia-Pacific share index added 0.6%, led by Japan. S&P 500, Nasdaq 100 and European contracts were in the red. The mixed picture follows the best month for global equities since 2020, which helped pare their drop this year to 15%.
Recent developments underlined the economic challenges facing China, including shrinking property sales and a contraction in factory activity that highlighted the cost of Beijing’s preference for mobility curbs to tackle Covid. The parlous backdrop may stoke speculation that more stimulus is needed.
Meanwhile, Fed Bank of Minneapolis President Neel Kashkari said Sunday the US central bank is committed to reaching its long-term inflation goal of 2%. Before that, Fed Bank of Atlanta President Raphael Bostic said the monetary authority has further to go in raising borrowing costs.
Treasury yields inched higher but at about 2.67% the 10-year rate is well down from June’s peak near 3.50%. The yen jumped for a fourth session versus the greenback. Oil, gold and Bitcoin all retreated.
The risk of a recession has cooled expectations for how sharply the Fed has to hike rates to tame inflation. That spurred a July rebound in stocks and bonds. But market jumps that ease financial conditions can imperil the goal of curbing demand to contain the cost of living, adding pressure on the central bank.
“We are in a bear market rally,” Barbara Ann Bernard, founder of hedge fund manager Wincrest Capital Ltd., said on Bloomberg Radio, adding she foresees a deceleration in expectations for corporate earnings.
Investors are also monitoring US House Speaker Nancy Pelosi’s trip to Asia. A statement from her office skipped any mention of a possible stopover in Taiwan. A visit may stoke US-China tension over the island.
Taiwan’s currency slid past 30 per dollar for the first time since 2020. Asia’s manufacturing slowdown is weighing on export-reliant economies like Taiwan.
What to watch this week:
- Airbnb, Alibaba and BP are among earnings reports
- PMIs from US and euro area, among others, Monday
- US construction spending, ISM manufacturing, Monday
- Reserve Bank of Australia rate decision, Tuesday
- US JOLTS job openings, Tuesday
- Chicago Fed President Charles Evans, St. Louis Fed President James Bullard due to speak at separate events, Tuesday
- OPEC+ meeting on output, Wednesday
- US factory orders, durable goods, ISM services, Wednesday
- BOE rate decision, Thursday
- US initial jobless claims, trade, Thursday
- Cleveland Fed President Loretta Mester due to speak, Thursday
- US employment report for July, Friday
Some of the main moves in markets:
- S&P 500 futures fell 0.4% as of 7:11 a.m. in London. The S&P 500 rose 1.4% on Friday
- Nasdaq 100 futures dropped 0.4%. The Nasdaq 100 rose 1.8% on Friday
- Japan’s Topix index climbed 1%
- South Korea’s Kospi was steady
- Australia’s S&P/ASX 200 index increased 0.7%
- China’s Shanghai Composite index rose 0.2%
- Hong Kong’s Hang Seng index added 0.1%
- Euro Stoxx 50 futures were down 0.2%
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was at $1.0222
- The Japanese yen was at 132.58 per dollar, up 0.5%
- The offshore yuan was at 6.7650 per dollar, down 0.2%
- The yield on 10-year Treasuries rose two basis points to 2.67%
- West Texas Intermediate crude was at $97.52 a barrel, down 1.1%
- Gold was at $1 760.32 an ounce, down 0.3%