Asian shares fully recover from last week’s slump: Markets close

(Bloomberg) — Asian stocks rallied on gains in Japanese shares, recovering losses from last week’s rout. U.S. and European stock futures rose on Tuesday and late Wednesday ahead of U.S. inflation data.

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Japanese stocks gained after a holiday as the yen provided support to exporters. MSCI’s Asia-Pacific gauge rose as much as 1%. That erased losses from last week’s decline, a risk-off move that sent indices around the world falling and the VIX US volatility index at one point above 65, compared with a lifetime average of 19.5.

“The market’s reaction to last week’s VIX spike reflects a reassessment of positioning rather than US data points or yen disengagement,” said Billy Leung, investment strategist at Global X Management in Sydney. “However, given the signs of overseas outflows and tight liquidity, it is important to be cautious in reading short-term Asian movements.”

Oil hit the $80 level on Monday as the U.S. considers an Iranian strike against Israel more likely. Fitch’s ratings on Israel’s sovereign debt were downgraded by one notch, keeping a negative outlook on the debt as ongoing military conflicts weigh on the country’s public finances. Treasuries took profits on Monday.

Asia’s stock market fell 6.1% on August 5 on fears of a worsening US economy, an extended sell-off in Japanese stocks and a move away from technology stocks.

Both the Nikkei 225 and Topix have fallen more than 7% since the end of July, after the Bank of Japan raised its key interest rate and unveiled plans to reduce its bond purchases. On August 5, when losses exceeded 20%, the parameters collapsed into a bear market.

The rate hike spurred yen gains, and the central bank suggests it won’t tighten so quickly to risk market volatility. Investors globally are unwinding trades, in which they fund the purchase of assets from stocks with currency to emerging market bonds.

After last week’s turmoil, markets will focus on the US consumer price index on Wednesday, the labor market and pre-load rate cuts to see if the Fed will have a freer hand, Krishna says. Cave of Evercore.

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“The first wave of the yen carry trade unwind should now be complete, and investors’ focus is now on US inflation and retail sales data to gauge the probability of a soft landing,” said Linda Lam, head of equity advisory North Asia at UnionBank Privy. . “Risk sentiments are moderated with most Asian markets expected to stabilize in the current range, barring major shocks that could dramatically change the path of central bank interest rate cuts,” he said.

Elsewhere in Asia, stocks were volatile in Hong Kong and mainland China as stock trading in China shrank to a four-year low. MSCI Inc. China continues to push stocks out of its indices, setting the stage for further declines in the country’s share of a key emerging market benchmark.

“For Chinese Internet giants reporting this week, it will be critical to see consumption weakness in China weighing on margins and ROIs,” said Brittney Lam, head of equities at Magellan Investments Holding Ltd. The tactical rally has quickly given way to increasingly positive policy support over the past few weeks, and the key measure of macro data points for China is liquidity – that is the size of the money supply, credit growth and the cost of liquidity ie interest rates.

Regulators told commercial banks in China’s Jiangxi province not to settle their purchases of government bonds, taking some more drastic measures to cool a market rally that has alarmed Beijing. At least four Chinese brokerages have begun new measures to curb domestic credit trading since last week, people familiar with the matter said.

The crackdown is starting to take its toll on corporate debt markets, as the average yield for one-year corporate yuan bonds with AA ratings — generally considered junk debt in the offshore market — saw its biggest jump since December 2022.

In the corporate world, shares of baby-products retailer Brainpeace Solutions Ltd made their debut in Mumbai, the latest deal to boost India’s growing market for fresh equity sales.

Highlights of this week:

• Germany ZEW Survey Expectations, Tuesday

• US PPI, Tuesday

• The Fed’s Raphael Bostick speaks on Tuesday

• Eurozone GDP, industrial production, Wednesday

• US CBI, Wednesday

• China House Prices, Retail Sales, Industrial Production, Thursday

• US Initial Jobless Claims, Retail Sales, Industrial Production, Thursday

• The central bank’s Alberto Musallem and Patrick Harker speak Thursday

• U.S. Housing Starts, University of Michigan Consumer Sentiment, Friday

• The central bank’s Austin Goolsbee speaks on Friday

Some key movements in the markets:

Shares

• S&P 500 futures were up 0.2% as of 6:50 a.m. London time.

• Nasdaq 100 futures rose 0.3%

• The MSCI Asia Pacific index rose 1%

• The MSCI emerging market index rose 0.1%

• Japan’s Topix rose 2.6%

• Australia’s S&P/ASX 200 rose 0.2%

• Hong Kong’s Hong Kong has changed little

• The Shanghai composite fell 0.1%

• Euro Stoxx 50 futures rose 0.3%

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0938

• The Japanese yen fell 0.4% to 147.76 per dollar

• The offshore yuan was little changed at 7.1790 per dollar

• The British pound was little changed at $1.2777

Cryptocurrencies

• Bitcoin rose 0.8% to $59,313.44

• Ether fell 0.8% to $2,659.06

Bonds

• The yield on 10-year Treasuries was little changed at 3.91%.

• Germany’s 10-year yield was little changed at 2.23%

• Britain’s 10-year yield fell three basis points to 3.92%

• Australia’s 10-year yield fell four basis points to 4.01%

materials

• Spot gold was down 0.4% at $2,462.46 an ounce

• West Texas Intermediate crude was down 0.7% at $79.53 a barrel.

This story was produced with the help of Bloomberg Automation.

–With assistance from Jason Scott.

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