Equities rally as economic data boost sentiment: Markets wrap
(Bloomberg) — Equities in Japan and China advanced, following gains on Wall Street, as investors cheered a string of encouraging economic data points from the world’s three largest economies.
Japan’s Topix index and China’s CSI 300 ( 000300.SS ) benchmark rallied along with European and US equity futures, with the latter adding to gains made on Wednesday. The moves point to at least a temporary boost in sentiment following the widespread losses seen across global equities last week.
In Japan, the economy grew faster in the second quarter than analysts forecast. China, meanwhile, saw signs of stabilization that included slowing declines in home prices and better-than-expected retail sales.
“Stronger-than-expected retail sales data out of China is what really stands out,” said Billy Leung, an investment strategist at Global X Management in Sydney. “Retail sales hold more significance compared to industrial output or other indicators because they’re harder for the government to influence directly.”
The economic numbers added further support for sentiment after US inflation data Wednesday showed year-on-year core consumer prices in July rose at the slowest pace since 2021, paving the way for anticipated Federal Reserve interest-rate cuts next month.
Traders are currently fully pricing in one 25 basis-point reduction in September and 100 basis points of easing through year-end, indicating a degree of confidence the central bank will deliver one half-point cut in the remaining three meetings of 2024.
Australian shares also advanced, while those in Taiwan declined. Financial markets in South Korea and India are shut for holidays.
A slump in a Hong Kong gauge of tech stocks moderated the scale of gains across the region with the likes of Tencent Holdings Ltd. falling despite an 82% increase in net income in results released late Wednesday. Regional tech bellwether Taiwan Semiconductor Manufacturing Co Ltd also dropped.
Hedge fund manager Michael Burry, who bet against the US housing market in 2008, further increased his stake in Alibaba Group Holding Ltd. despite cutting his equity portfolio in half in the second quarter.
Treasuries, Dollar
Treasuries fell in Asia with the 10-year yield rising one basis point to 3.84%. The dollar strengthened versus most of its major peers. The yen was little changed near 147 to the greenback after weakening 0.3% Wednesday.
Australian 10-year bond yields slipped to a 13-month low before trimming those declines as jobs growth surpassed expectations, underscoring the resilience of the labor market to elevated interest rates.
Not everyone saw the China numbers positively.
The “July data suggest the government will have to provide more stimulus to meet its 5% economic growth target for the year,” Ed Yardeni, who runs Yardeni Research, wrote in a research note. “Most striking is the small but unusual decline in bank loans during the month. It suggests a lack of confidence among businesses and consumers, potentially leading to reduced investment and spending.”
‘Weak Sentiment’
In addition to China’s data, the central bank announced it would inject one-year liquidity to domestic lenders on Aug. 26, instead of Aug. 15, a rare delay that comes amid a broad overhaul of its policy toolkit.
Investors will also be focused on further reaction to the decision by Japanese Prime Minister Fumio Kishida to bow out of the ruling Liberal Democratic Party’s leadership election next month.
The move will trigger “a period of modest political uncertainty,” said Taro Kimura, senior Japan economist at Bloomberg Economics. “That’s hardly a welcome prospect for markets in light of the recent turmoil in stocks and the yen.”
In commodities, oil clawed back gains in early trading after falling for a second session on Wednesday. Gold edged higher after two daily declines to trade above $2,450 per ounce.
Key events this week:
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
