Global risk-on rally extends as Asia stocks gain: Markets wrap

The rally in global equities continued Monday in Asia on positive momentum from Wall Street and signs of moderating US inflation.

Equities in Shanghai rose more than 1% while Hong Kong-listed technology companies jumped around 3%. Shares of Asian electric-vehicle makers and related suppliers also climbed, benefiting from Tesla Inc. and BYD setting sales records in the second quarter.

Japan’s Topix index was on course for another gain that has the index repeatedly reaching highs last seen in mid 1990 amid improved confidence among big manufacturers.

The gains in Chinese stocks Monday contrast with the 6% drop in MSCI’s China Index in the first half. While many investors remain wary of policy risks and China’s tepid economic rebound, some are pointing to attractive valuations.

“We’re still positive on the market, mainly from a risk-reward perspective,” James Wang, head of China strategy at UBS Group AG’s investment research unit, said on Bloomberg Television. “The market’s still trading one standard deviation cheap relative to history, two standard deviations cheap relative to the rest of the world.”

Euro Stoxx 50 contracts rose, while futures the S&P 500 were flat and those for the Nasdaq 100 edged up. The US tech index climbed almost 2% last week and notched its best ever first-half of a year. The S&P 500 reached the highest since April 2022 and posted its best first half since 2019, with Apple hitting the $3 trillion milestone along the way.

Traders were encouraged as data showed moderating inflation, even if came at the expense of growth. The personal consumption expenditures price index, one of the Federal Reserve’s preferred inflation gauges, rose 0.1% in May. From a year ago, the measure stepped down to 3.8%, the smallest annual advance in more than two years.

This kept action in the bond market subdued during the US session Friday and again on Monday in Asia, after what was an eventful first half for the rates market.

Yields on policy sensitive three-year Australian government bonds fell about eight basis points Monday ahead of a central bank decision Tuesday that is dividing economists and money markets on the prospects of a rate hike or a pause.

Most major currencies were confined to narrow ranges versus the dollar. The offshore yuan advanced as much as 0.3% after the People’s Bank of China once again set a stronger-than-expected fix for the currency.

China’s Caixin manufacturing PMI data showed the world’s second-largest economy is still struggling to rebound. Traders were also weighing the implications of Chinese President Xi Jinping elevating a long-serving technocrat as the central bank’s top Communist Party official, which may indicate no drastic shifts in policy for now.

The yen fell about 0.1% and remained this year’s worst performing Group-of-10 currency,

Oil eased about 0.2% as the second half kicked off, with traders focused on challenges to demand and a complex supply outlook.

From the US to markets around the world, the rally in equities has generated concern as well a celebration, given how much it appears to have decoupled from a worsening economic backdrop.

Nearly $5 trillion has been added to the value of companies in the Nasdaq 100 since the start of the year, with the tech-heavy gauge defying bubble warnings and jumping almost 40%. The advance in the most-influential group in the S&P 500 helped push the index up 16% in 2023. Gains have been even more pronounced when narrowed down to the megacap space — which has soared 74%.

Key events this week:

• Eurozone S&P Global Eurozone manufacturing PMI, Monday
• UK S&P Global/CIPS UK Manufacturing PMI, Monday
• US construction spending, ISM Manufacturing, light vehicle sales, Monday
• Australia interest rate decision, Tuesday
• US Independence Day national holiday. Financial markets closed, Tuesday
• China Caixin services and composite PMI, Wednesday
• Eurozone S&P Global Eurozone services PMI, PPI, Wednesday
• OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
• FOMC issues minutes on June policy meeting, Wednesday
• New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
• US initial jobless claims, trade, ISM services, job openings, Thursday
• Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
• US unemployment rate, nonfarm payrolls, Friday
• ECB’s Christine Lagarde addresses an event in France, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 6:45 a.m. London time. The S&P 500 rose 1.2% Friday
• Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 1.6%
• Japan’s Topix rose 1.3%
• Hong Kong’s Hang Seng Index rose 1.9%
• China’s Shanghai Composite Index rose 1.4%
• Australia’s S&P/ASX 200 Index rose 0.6%
• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0912
• The Japanese yen was little changed at 144.43 per dollar
• The offshore yuan rose 0.2% to 7.2552 per dollar
• The Australian dollar rose 0.1% to $0.6673
• The British pound was little changed at $1.2696

Cryptocurrencies

• Bitcoin rose 0.3% to $30 690.07
• Ether rose 1.5% to $1,947.15

Bonds

• The yield on 10-year Treasuries was little changed at 3.83%
• Japan’s 10-year yield rose 0.5 basis point to 0.400%
• Australia’s 10-year yield declined four basis points to 3.99%

Commodities

• West Texas Intermediate crude fell 0.2% to $70.50 a barrel
• Spot gold was little changed

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