Asian Stocks Head for Best Week in Over a Year: Markets Wrap – Yahoo Finance

August 15, 2024

(Bloomberg) — Asian stocks rose as traders reinvested into riskier assets on rising hopes that the U.S. economy can avoid recession, while U.S. Treasuries extended losses and the yen is on track for its worst week since May.

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Nearly every major stock index rose in Asia, sending the region’s stock indexes to their best weekly performance in a year. Japanese stocks gained as a weaker yen boosted exporters’ earnings. The yen fell 1.3 percent against the dollar on Thursday to trade at the 149 yen level, easing concerns about a large unwinding of carry trades.

A flurry of U.S. data released this week, ranging from inflation to jobless claims to retail sales, is reassuring investors and bolstering the case of those who argue the world’s largest economy is primed for a “Goldilocks” scenario in which inflation is tamed without jeopardizing growth.Global stock markets have largely erased losses seen last week when traders worried the Federal Reserve would not cut interest rates fast enough to halt a recession.

“Asian stocks are seeing a nice rally today as recently released promising economic data creates a new sense of ‘perfect balance’. Japanese shares in particular continue their strong recovery and show no signs of slowing just yet,” said Hebe Chen, analyst at IG Markets.

Asian government bonds are stabilizing after plunging on Thursday on expectations the Fed will taper its monetary easing.Swaps market pricing now expects three 25-basis-point rate cuts at the Fed’s remaining 2024 meetings, down from four expected earlier this week.

The gains in Japanese stocks came amid renewed weakness in the yen, which was trading slightly higher at around 149 to the dollar after falling 1.3% against the dollar the previous day to its lowest since early August. The weakness could also lure some hedge funds back into the carry trade that saw an explosion two weeks ago.

A weaker currency boosted Japanese stocks, helping them recover from last week’s turmoil and boosting Japan’s economic growth data on Thursday, propelling the Nikkei average to its best week since April 2020.

Elsewhere in Asia, the governor of the People’s Bank of China promised to take further steps to support the country’s economic recovery but warned against adopting “radical” measures.

Meanwhile, Australian government bond yields rose on Friday, partly tracking government bonds and after the Governor of the Australian central bank said the Reserve Bank of Australia has a long way to go before easing monetary policy.

Alibaba Group Holding Ltd. rose as optimism about tech stocks outweighed concerns about its earnings, while JD.com Inc. posted its biggest gain since March after reporting better-than-expected net profit in earnings late on Thursday.

US Rally

The S&P 500 extended its six-day winning streak to 6.6% on Thursday, its best performance since November 2022. The Russell 2000 index of smaller companies outperformed, rising 2.5% on the day. Wall Street’s “fear gauge,” the VIX, fell to around 15.The rebound in U.S. stocks from last week’s heavy sell-off suggests that trend-following quantitative funds may be making a comeback, further supporting stock prices.

Walmart Inc., a barometer of consumer spending, surged on its strong outlook, and Applied Materials Inc., the largest U.S. maker of semiconductor manufacturing equipment, issued sales guidance late on Tuesday that was in line with expectations.

Fed officials have been trying to raise interest rates to ease inflation without shrinking the economy, a scenario known as a “soft landing.” St. Louis Fed President Alberto Mussallem said the right time to cut rates is approaching. Atlanta Fed President Raphael Bostic told the Financial Times he is “open” to cutting rates in September.

“A soft landing is no longer a hope, but a reality,” said David Russell of TradeStation. “These figures also show that the recent market volatility wasn’t actually due to growth fears — it was simply normal summer seasonality amplified by currency market movements.”

In commodities, gold is set to post a modest weekly gain, while crude oil is set to post a slight decline as markets price in strong U.S. economic data and a possible attack on Israel by Iran or its proxies, along with a weaker outlook for Chinese demand.

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