Equity markets advanced in Asia as stocks extended their rally in the US while the New Zealand dollar climbed on easing inflation.
Stocks rose at the open in Japan, South Korea and Australia. Contracts for stocks in Hong Kong declined, while those for the US were little changed.
The Kiwi jumped in early trading and yields bounced after inflation slowed less than forecast. Australian bonds were mixed, with the 10-year yield down four basis points at 3.93%.
The yen weakened for a second day after Bank of Japan Governor Kazuo Ueda said it would maintain monetary easing unless there is a shift in its price goal view. A gauge of dollar strength steadied.
Despite the yen’s weakness, the BOJ is unlikely to alter its monetary policy in next week’s meeting, said Shoki Omori, chief desk strategist at Mizuho Securities. Ueda will probably stick to his forward guidance focus stance and will not change major policy without guiding markets, he added.
Markets in the US closed near session highs on Tuesday, as results from Bank of America Corp. and Morgan Stanley bolstered bank shares and a rally in equities linked to artificial intelligence resumed. Both the S&P 500 and the tech-heavy Nasdaq 100 rose for a second day, while the blue-chip Dow Jones Industrial Average outperformed, up more than 1% for a seventh-day of gains, its longest winning streak in more than two years.
Treasuries were steady in early trading hours in Asia after ending mixed Tuesday, with the yield on the policy-sensitive two-year note rising and the 10-year benchmark’s rate falling. In the swaps market, traders fully priced in a quarter-point hike at next week’s Federal Reserve meeting. European bonds gained after European Central Bank Governing Council member Klaas Knot said monetary tightening beyond next week’s meeting is anything but guaranteed.
Recent data suggest that central banks are inching closer to their peak monetary tightening, according to Robert Mead, head of Australia and co-head of Asia Pacific portfolio management at Pacific Investment Management Co. “Depending on the jurisdiction, we’re close,” he said on Bloomberg Television. “Bonds are now exciting. Once again, they’ve become sort of attractive for investors and there’s lots of action.”
US data showed industrial production and retail sales missed estimates, though an underlying measure of household spending pointed to a more resilient consumer.
Signs of slowing inflation and an improving economic picture have led traders to dial back wagers on how high the US overnight benchmark rate will go. However, quarterly forecasts from policy makers have shown a median expectation of two more quarter-point increases this year to bring inflation in line with the Fed’s target.
On the earnings front, Bank of America delivered a surprise gain from its core Wall Street businesses and Morgan Stanley executives pointed to an improved outlook. Goldman Sachs Group Inc. is scheduled to report Wednesday.
In tech, Microsoft Corp. jumped as much as 6.1% after providing details on pricing for some artificial-intelligence services. set an expensive price tag on new AI products, buoying the sector. Netflix Inc. and Tesla Inc. are slated to release results Wednesday.
“With US economic growth still robust in Q2 and the US dollar weakening modestly further,” earnings estimates could again prove conservative this quarter “and we could see companies deliver material earnings beats, on average,” strategists at JPMorgan Chase & Co., including Daniel Motoc and Bram Kaplan, wrote in a note.
In contrast to the risk-on tone, the Nasdaq Golden Dragon Index of US-traded Chinese shares fell more than 3%. Among the latest reports, signs of financial stress at developers are hitting China’s dollar-bond market, and economists said China’s plan to boost consumption was still light on steps to meaningfully bolster recovery.
Key events this week:
- Eurozone, UK CPI, Wednesday
- US housing starts, Wednesday
- China loan prime rates, Thursday
- US initial jobless claims, existing home sales, Conf. Board leading index, Thursday
- Japan CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:30 a.m. Tokyo time. The S&P 500 rose 0.7%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 0.8%
- Japan’s Topix rose 0.8%
- Australia’s S&P/ASX 200 rose 0.6%
- Euro Stoxx 50 futures rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1232
- The Japanese yen fell 0.1% to 138.97 per dollar
- The offshore yuan was little changed at 7.1934 per dollar
- The Australian dollar was little changed at $0.6814
- The New Zealand dollar rose 0.4% to 0.6295
Cryptocurrencies
- Bitcoin rose 0.5% to $29,940.05
- Ether rose 0.4% to $1,902.79
Bonds
- The yield on 10-year Treasuries was little changed at 3.78%
- Australia’s 10-year yield declined four basis points to 3.93%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Joanna Ossinger and Yumi Teso.
