Asia shares gain; Yuan falls on weak China data: Markets wrap

Most Asian equities rose before scheduled US debt talks to avert a default and as traders digested the latest data from China. The yuan weakened.

An Asia-Pacific equity gauge climbed 0.6% after trimming an advance on weak Chinese economic figures. Mainland China stocks were mixed, with the Shanghai Composite Index flipping to a gain while the CSI 300 Index pared losses.

Some investors may have priced in the weakness in China’s April data, following a slew of disappointing indicators. “The impact of today’s data on the market will be limited,” said Wu Xuan, chief market analyst at Tebon Fund Management.

Further bullish bets by Michael Burry on e-commerce giants JD.com Inc. and Alibaba Group Holding lent support to Chinese equities, with the Nasdaq Golden Dragon China Index rallying over 4% on Monday.

Meanwhile, Japan’s Topix index headed for its highest close since 1990 amid robust foreign buying. Solid fundamentals and expectations for structural changes “justify a bullish stance” on Japan’s equities, Goldman Sachs Group Inc. said.

The dovish bias by the Bank of Japan is also positive for Japanese equities and “earnings have been increasing relative to other jurisdictions,” said Chris Weston, head of research at Pepperstone Group. “There’s a lot working for it at the moment from a technical and fundamental perspective,” he said on Bloomberg Television. “We still like the case that’s going on in Japan right now.”

South Korean equities also rallied, supported by chip stocks on the potential merger between Kioxia Holdings and Western Digital Corp Australian stocks declined.

US equity futures remained on the back foot before a meeting between President Joe Biden and House Speaker Kevin McCarthy Tuesday. The US stock market gained Monday amid mixed signals sent by both factions in the debt-ceiling talks. Treasury Secretary Janet Yellen reiterated her department may run out of cash as soon as June 1 unless Congress raises or suspends the federal debt limit.

The dollar steadied and Treasuries edged higher, while the Aussie weakened after the China data. Reserve Bank of Australia minutes showed officials weighed the risk of upside surprises to inflation amid a tight labor market in their surprise decision to hike rates this month.

More volatility

UBS Private Wealth Management expects to see more volatility in the markets, especially on the short-end of the Treasury curve, as deadline approaches on the debt-ceiling dispute. “If you’re someone who has cash on the sideline, right now we are recommending that you go ahead and you lock in those improved bond yields,” financial adviser Sarah Ponczek said on Bloomberg Television.

In the US, data showed New York manufacturing slid the most since April 2020. This week’s figures will likely underscore more economic weakness, emboldening the Federal Reserve’s dovish voices even though inflation has failed to reassure, according to Anna Wong at Bloomberg Economics.

JPMorgan Chase & Co.’s Marko Kolanovic joined a chorus of Wall Street strategists Monday in warning that the US debt-ceiling impasse is yet another headwind threatening the outlook for equity markets. Morgan Stanley’s Mike Wilson delivered a similar warning on the debt-ceiling deadline, noting the bank’s clients said the issue is unlikely to be resolved without some near-term volatility.

Elsewhere, oil climbed and gold was little changed.

Key events this week:

• Eurozone GDP, Tuesday
• US retail sales, industrial production, business inventories, Tuesday
• Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
• Eurozone CPI, Wednesday
• BOE Governor Andrew Bailey delivers keynote speech, Wednesday
• US housing starts, Wednesday
• US initial jobless claims, Conference Board leading index, existing home sales, Thursday
• Japan CPI, Friday
• ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
• New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 12:46 p.m. Tokyo time. The S&P 500 rose 0.3% Monday
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.6%
• Japan’s Topix index rose 0.5%
• Hong Kong’s Hang Seng Index rose 0.4%
• China’s Shanghai Composite Index was little changed
• Australia’s S&P/ASX 200 Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0883
• The Japanese yen was little changed at 136.00 per dollar
• The offshore yuan fell 0.1% to 6.9671 per dollar
• The Australian dollar was little changed at $0.6696

Cryptocurrencies

• Bitcoin fell 0.8% to $27 125.58
• Ether fell 0.7% to $1,812.99

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.48%
• Japan’s 10-year yield declined 0.5 basis point to 0.4%
• Australia’s 10-year yield advanced one basis point to 3.44%

Commodities

• West Texas Intermediate crude rose 0.5% to $71.45 a barrel
• Spot gold was little changed

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