(Bloomberg) — Japanese and Chinese stocks followed Wall Street’s gains as investors cheered a string of upbeat economic data from the world’s three largest economies.
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Japan’s Topix index and China’s CSI 300 index rose along with European and U.S. stock futures, with U.S. stocks extending Wednesday’s gains. The moves signaled at least a temporary pick-up in sentiment following last week’s broad sell-off in global stock markets.
Japan’s second-quarter economic growth beat analysts’ expectations, while China showed signs of stabilizing as home price declines slowed and retail sales beat expectations.
“It really stands out that China’s retail sales beat expectations,” said Billy Leung, investment strategist at Global X Management in Sydney. “Retail sales carry more weight than industrial production and other indicators because it’s harder for the government to directly influence.”
U.S. inflation data released on Wednesday showed that core consumer prices rose at the slowest pace year-on-year in July since 2021, economic data further bolstering sentiment and paving the way for an expected Federal Reserve interest rate cut next month.
Traders are now fully pricing in one 25-basis-point rate cut in September and 100-basis-point easing by the end of the year, signaling confidence that the central bank will deliver one half-point rate cut in its remaining three meetings in 2024.
Australian shares also rose, while Taiwanese shares fell. Financial markets in South Korea and India were closed for public holidays.
A drop in Hong Kong’s technology index pared gains across the region, with shares of Tencent Holdings Ltd. falling despite reporting an 82 percent rise in net profit in earnings released late on Wednesday. Regional tech beacon Taiwan Semiconductor Manufacturing Co. (TSMC) also fell.
Hedge fund manager Michael Burry, who bet on a U.S. housing market collapse in 2008, further increased his investment in Alibaba Group Holding Ltd., even as he halved his stock portfolio in the second quarter.
Government bonds, dollars
In Asia, government bonds fell, with the 10-year Treasury yield rising 1 basis point to 3.84 percent. The dollar strengthened against other major currencies. The yen was little changed around 147 yen to the dollar after falling 0.3 percent on Wednesday.
Australia’s 10-year bond yields fell to their lowest level in 13 months but the decline was pared as better-than-expected job growth highlighted the labour market’s resilience to rising interest rates.
Not everyone viewed China’s numbers kindly.
“July’s data suggests the government will need to provide further stimulus to reach its 5% economic growth target this year,” Ed Yardeni, who runs Yardeni Research, wrote in a research note. “Most shocking was the small but unusual decline in bank lending in the month, which signals a lack of business and consumer confidence and could lead to less investment and spending.”
“Weak emotions”
In addition to the data, the People’s Bank of China said it would begin providing one-year liquidity to domestic financial institutions on Aug. 26 instead of Aug. 15, an unprecedented delay amid a major overhaul of policy tools.
Investors will also be watching for further reaction to Prime Minister Fumio Kishida’s decision to withdraw from next month’s Liberal Democratic Party presidential election.
Taro Kimura, senior Japan economist at Bloomberg Economics, said the move would trigger “a period of moderate political uncertainty,” “not exactly a welcome prospect for markets given the recent turmoil in stock prices and the yen.”
In commodities, crude oil regained early gains after falling for the second time on Wednesday, while gold edged up after two days of losses, topping $2,450 an ounce.
Major events this week:
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U.S. initial jobless claims, retail sales, industrial production Thursday
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Federal Reserve Bankers Alberto Mussallem and Patrick Harker to speak Thursday
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U.S. housing starts, University of Michigan consumer confidence, Friday
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Fed President Austin Goolsby to speak Friday
Some of the key market developments:
stock
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S&P 500 futures were up 0.2% as of 2:53 p.m. Tokyo time.
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Japan’s TOPIX rises 0.6%
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Australia’s S&P/ASX 200 little changed
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Hong Kong’s Hang Seng Index fell 0.2%
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The Shanghai Composite Index rose 0.6%
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Euro Stoxx 50 futures up 0.4%
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro was unchanged at $1.1012.
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The Japanese yen rose 0.1% to 147.11 to the dollar.
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The offshore yuan was little changed at 7.1538 per dollar.
Cryptocurrency
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Bitcoin fell 1.2% to $58,434.84.
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Ether fell 1.2% to $2,644.59.
Bonds
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The yield on the 10-year Treasury note was little changed at 3.83%.
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Japan’s 10-year government bond yield rose 2 basis points to 0.835%.
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Australia’s 10-year government bond yield fell 5 basis points to 3.88%.
merchandise
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West Texas Intermediate crude rose 0.1% to $77.08 a barrel.
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Spot gold rose 0.2% to $2,452.88 an ounce.
This story was produced with assistance from Bloomberg Automation.
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