Asian Stocks Extend Rally on China, US Sentiment: Markets Wrap

Stocks in Asia extended gains as risk appetite across financial markets got a further boost from China’s latest stimulus measures and as US benchmarks hit fresh records.

(Bloomberg) — Stocks in Asia extended gains as risk appetite across financial markets got a further boost from China’s latest stimulus measures and as US benchmarks hit fresh records.

Equities in Australia advanced, while Japan’s Nikkei index was poised to erase all losses since the Bank of Japan’s July 31 interest rate hike. In the US, the S&P 500 climbed to its 42nd closing record of this year while the Nasdaq Golden Dragon Index — a gauge of Chinese shares listed in the US — jumped 11%. Futures for US indexes were little changed early Friday.

Emerging-market stocks had their best day in nearly a year on Thursday, propelled higher by new stimulus pledges by the Chinese government and strong US economic data. The dollar steadied on Friday after falling in its previous session, while 10-year US Treasury yields were mostly flat.

China’s benchmark CSI 300 Index is headed for its biggest weekly gain in almost a decade after the nation’s top leaders delivered a forceful pledge to increase fiscal support and stabilize the property sector to revive growth. Further bullishness came from US data showing the world’s biggest economy bounced back from the pandemic in stronger shape than previously estimated. 

Now, traders are waiting for further details on China’s stimulus measures ahead of a weeklong holiday as well as the next batch of catalysts that could give them hints about the US economy, with the Federal Reserve’s preferred inflation indicator and a snapshot of consumer demand due Friday.

Chinese President Xi Jinping earlier Thursday presided over a top Communist Party gathering where officials pledged to make the real estate market “stop declining” — their strongest vow yet to stabilize the sector that’s hammered Chinese consumer confidence. Earlier in the week, the central bank cut a raft of interest rates among other easing measures.

“Greater stimulus measures out of China and the market pricing an aggressive Fed easing cycle, while the US economy is strong, bode well for risk assets,” Elias Haddad, a strategist at Brown Brothers Harriman, wrote in a note. “This encouraging risk backdrop is a drag on the dollar mostly against growth-sensitive currencies.”

US stock indexes were also propelled higher by Micron Technology Inc., which gave a strong forecast aided by AI demand. On the other hand, news of the US Justice Department’s probe of Super Micro Computer Inc. — also a beneficiary of the AI boom — pushed its shares lower. After the closing bell, Costco Wholesale Corp. posted higher-than-expected profit.

Elsewhere, consumer inflation in Tokyo eased this month after outgoing Prime Minister Fumio Kishida reinstated energy subsidies to help households cope with one of the hottest summers on record. The yen was weaker against the greenback early Friday.

US Economy

Revised data showed the US economy in better shape than initially expected, spurred mainly by bigger consumer-driven growth fueled by robust incomes. A decline in US jobless claims underscored the resilience of the labor market. But investors tuning into commentary from Fed Chair Jerome Powell on Thursday didn’t get any details on the economic outlook or path for monetary policy.

Federal Reserve Governor Lisa Cook said she “wholeheartedly” supported the central bank’s move last week to cut interest rates by a half percentage point, but didn’t say how much more easing might be needed in the near term.

“We think there is the potential that economic data will be more resilient, especially on jobs, than the market is expecting,” said Peter Tchir, head of macro strategy at Academy Securities. 

In commodities, oil slid further as Saudi Arabia was reportedly committed to increasing output in December, while Libya named its new central bank governor, opening the way to reviving some crude production. Copper rallied back above $10,000 a ton and iron ore broke through $100 while gold hit yet another record high on Thursday. 

Key events this week: 

• China industrial profits, Friday
• Eurozone consumer confidence, Friday
• US PCE, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 9:14 a.m. Tokyo time
• Hang Seng futures rose 2.7%
• Japan’s Topix fell 0.2%
• Australia’s S&P/ASX 200 was little changed
• Euro Stoxx 50 futures rose 2.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1172
• The Japanese yen fell 0.1% to 145.01 per dollar
• The offshore yuan fell 0.1% to 6.9812 per dollar
• The Australian dollar fell 0.2% to $0.6885

Cryptocurrencies

• Bitcoin rose 0.7% to $65,104.27
• Ether was little changed at $2,631.61

Bonds

• The yield on 10-year Treasuries was little changed at 3.79%
• Japan’s 10-year yield declined 2.5 basis points to 0.805%
• Australia’s 10-year yield advanced one basis point to 3.95%

Commodities

• West Texas Intermediate crude fell 0.7% to $67.21 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.