Stocks gain on China economy support, US talks: markets wrap

Stocks climbed with Hong Kong leading gains as traders weighed better prospects for the world’s second-biggest economy and signs of reduced US-China tensions.

The benchmark index in Hong Kong jumped 4%, and is poised to hit the milestone of a technical bull market. More measures to ease a cash crunch in China’s beleaguered property sector, a relaxation of Covid curbs, and efforts by the central bank to maintain ample liquidity boosted sentiment.

Contracts for the S&P 500 and the Nasdaq 100 were up as well. The yen fell after Japan unexpectedly reported a contraction in its economy, reinforcing expectations for a dovish monetary stance.

The dollar and Treasury yields held their gains, with the 10-year rate around 3.87% after Federal Reserve speakers highlighted their resolve to tackle inflation. Fed Vice Chair Lael Brainard briefly buoyed sentiment after she said it would be appropriate “soon” to slow the pace of interest-rate hikes.

“It’s certainly a time to be thinking about a recovery regime unfolding for markets,” Kristina Hooper, chief global market strategist at Invesco, said on Bloomberg Radio. “But it’s going to take a little time before we know if this really is something of a turning point for inflation and the Fed can be a lot more comfortable about hastening the end of tightening.”

Chinese technology stocks were among the top contributors to gains in the MSCI Asia Pacific Index as investors bet the worst may be over for some of the major players. Taiwan Semiconductor Manufacturing Co. surged as much as 9.4% after Warren Buffett took a stake of about $5 billion in the chipmaker.

Now may be an interesting time to reinvest in emerging markets, according to Kathryn Kaminski, chief research strategist and portfolio manager at AlphaSimplex Group. “You’ve really seen a lot of value taken out of some of those indices,” she said on Bloomberg Radio.

Investors poured money into exchange-traded funds tracking emerging-market assets last week at the fastest pace in six months, according to data compiled by Bloomberg.

Despite these positive signs in Asia and indications of moderating inflation in the US, higher borrowing costs are a headwind for the global economy. Covid lockdowns also impacted China, with the latest data showing retail sales contracting for the first time since May.

In Japan, gross domestic product shrank in the three months through September, as consumers spent less amid a resurgence of Covid cases and the weak yen battered trade. The yen was at about 140 versus the dollar on Tuesday, having strengthened from the 150 level seen in October.

Elsewhere, oil extended losses as concerns over the near-term demand outlook overshadowed signs of tightening supply heading into winter. Gold was steady.

Key events this week:

  • Former US President Donald Trump plans to make an announcement, Tuesday
  • US empire manufacturing, PPI, Tuesday
  • US business inventories, cross-border investment, retail sales, industrial production, Wednesday
  • Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
  • ECB President Christine Lagarde speaks, Wednesday
  • Eurozone CPI, Thursday
  • US housing starts, initial jobless claims, Thursday
  • Fed’s Neel Kashkari, Loretta Mester speak, Thursday
  • US Conference Board leading index, existing home sales, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.5% as of 2:26 p.m. in Tokyo. The S&P 500 fell 0.9%
  • Nasdaq 100 futures rose 0.7%. The Nasdaq 100 fell 1%
  • Japan’s Topix index rose 0.5%
  • South Korea’s Kospi index was little changed
  • Hong Kong’s Hang Seng Index rose 4.1%
  • China’s Shanghai Composite Index rose 1.5%
  • Australia’s S&P/ASX 200 Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.0332
  • The Japanese yen fell 0.2% to 140.20 per dollar
  • The offshore yuan was little changed at 7.0377 per dollar

Cryptocurrencies

  • Bitcoin rose 2.3% to $16,755.62
  • Ether rose 2.7% to $1,258.93

Bonds

  • The yield on 10-year Treasuries advanced two basis points to 3.87%
  • Australia’s 10-year yield declined one basis point to 3.75%

Commodities

  • West Texas Intermediate crude fell to $85.35 a barrel
  • Spot gold rose to $1 773.24 an ounce
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