Asian Stocks Climb, Yen Rallies Off Historic Lows: Markets Wrap

(Bloomberg) — Stocks in Asia rose after economic data supported the case for Federal Reserve interest-rate cuts, and the yen bounced off its lowest level against the dollar since 1986.

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The MSCI Asia-Pacific gauge hit its highest point in over two years, with technology shares contributing probably the most to the rally. Japan’s Topix hit a record intraday high and equities in South Korea, Taiwan, and Australia also advanced. US futures contracts were little modified after the S&P 500 and Nasdaq 100 scaled records in a shortened session ahead of a US holiday.

The yen strengthened after once more touching its lowest level since 1986 against the greenback within the previous session. Speculation persists that the Bank of Japan will tighten policy only steadily. A gauge of dollar weakened for the third successive session.

Global stocks are on target for his or her longest stretch of weekly gains since March on the back of a string of soppy economic data within the US, which has brought the concept of September rate cuts back on table. On Wednesday, reports showed the American services sector contracted on the fastest pace in 4 years, while the labor market saw further signs of softening.

“Weaker Treasury yields and a dip within the US dollar on dovish rate bets could also be supportive of risk sentiments across the region,” said Jun Rong Yeap, market strategist at IG Asia Pte. The “slowing US growth prospects” are making a September rate cut “more likely than not,” he said.

Minutes from the Fed’s June policy meeting showed officials were awaiting evidence that inflation is cooling and were divided on how long to maintain rates elevated. Swap traders projected almost two rate cuts in 2024, with the primary in November — though bets on a September reduction increased.

“Bad news is nice news,” said Fawad Razaqzada at City Index and Forex.com. “That’s how risk assets reacted within the aftermath” of Wednesday’s US data.

Treasury 10-year yields were regular after dropping seven basis points to 4.36% within the prior session, which weighed on an index of dollar strength. Most Asian currencies gained against the greenback led by Thailand’s Baht and Taiwanese dollar.

Elsewhere in Asia, Chinese electric-car brands held on to their share of the slumping European EV market in May. Automakers like BYD Co. made up 8.7% of total EV sales, roughly on par with a yr ago, as Chinese firms pressure European counterparts with latest, inexpensive models.

Meanwhile, Britons prepared to move to the polls in a general election Thursday. The pound was little modified in early Asian trading. Individually, traders are looking ahead to indications if President Joe Biden will drop out of the US presidential race. Wall Street has began shifting money to and from the dollar, Treasuries and other assets that will be impacted if his rival Donald Trump returns to office.

“The UK and French elections shall be more of a brief concern for the markets,” Adrian Zuercher, chief investment officer at UBS AG Private Banking told Bloomberg Radio. But “Trump is a unique story, particularly, the trade war situation, we may have to see how aggressive he shall be on tariffs and that may resonate slightly bit longer” with the markets, he said.

Investors will now keep an close eye on Friday’s US jobs report. Economists anticipate a 190,000 gain in June non-farm payrolls — lower than the previous month — with the unemployment rate holding at 4%.

“Given other evidence of a cooling economic backdrop, the payroll report may very well be increasingly decisive for the Fed because it seeks a rationale to signal an easing of rates,” said Quincy Krosby at LPL Financial.

Chicago Fed President Austan Goolsbee said there’s still lots of data the US central bank must see before gaining the boldness to chop rates of interest.

In commodities, gold gained for a second day after breaking out of a days-long tight trading range. Iron futures climbed to the very best level in nearly a month on optimism for improvement in demand from China.

Key events this week:

  • UK general election, Thursday

  • US Independence Day holiday, Thursday

  • Eurozone retail sales, Friday

  • US jobs report, Friday

  • Fed’s John Williams speaks, Friday

A number of the fundamental moves in markets:

Stocks

  • S&P 500 futures were little modified as of 1:03 p.m. Tokyo time

  • Nasdaq 100 futures were little modified

  • Japan’s Topix rose 0.7%

  • Australia’s S&P/ASX 200 rose 1.1%

  • Hong Kong’s Hang Seng was little modified

  • The Shanghai Composite fell 0.4%

  • Euro Stoxx 50 futures were little modified

Currencies

  • The Bloomberg Dollar Spot Index was little modified

  • The euro was unchanged at $1.0786

  • The Japanese yen rose 0.1% to 161.52 per dollar

  • The offshore yuan was little modified at 7.2994 per dollar

Cryptocurrencies

  • Bitcoin fell 0.8% to $59,047.63

  • Ether fell 0.5% to $3,239.31

Bonds

Commodities

This story was produced with the help of Bloomberg Automation.

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