Hong Kong Stocks Lead Advance in Asia, Yen Surges: Market Wraps

(Bloomberg) — Asian stocks advanced on Monday led by a rally in Hong Kong technology stocks, while hopes of lower U.S. interest rates pushed the region’s currency to a five-month high against the greenback.

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Asian shares rose, after their best week in more than a year. Equity markets in China rallied as Hong Kong’s technology index rose more than 2.5%, boosted by JD.com Inc., whose shares rose the most since June after reporting unexpected results.

Contracts for European and US equities also rose. Meanwhile, the Bloomberg Asia Dollar Index rose 0.6%, while it rose 1%.

Monday’s activity showed concerns about the US recession and the prospect of lower borrowing costs boosted sentiment in the region. The main signpost for the week will be Friday, when the Chairman of the Federal Reserve Jerome Powell is expected to give fresh insight into the course of US monetary policy at the annual confab of the central bank in Jackson Hole.

“Due to recent short-term-oriented trading activity, investors are buying to discount the US rate cut as prices in Hong Kong look attractive,” said Steven Leung, executive director at UOB Kay Hian Hong Kong. “Once the cuts are confirmed, investors will take short-term profits and sell the good news.”

Goldman Sachs over the weekend cut the chance of a US recession next year to 20% from 25%, citing last week’s retail sales and jobless claims data. If the August job report set for release on September 6 “looks good enough, we will probably cut the probability of our recession back to 15%,” Goldman economists led by Jan Hatzius wrote in a report to clients on Friday.

In Asia, investors will look this week to central bank meetings in Indonesia and South Korea for signs of policy easing, while Thailand’s decision will be important after reports the nation’s new prime minister may abandon a key stimulus package.

Stronger Asian currencies benefiting from improved risk sentiment should bring faster policy rate cuts by many Asian central banks, Tomo Kinoshita, global market strategist at Invesco Asset Management Japan, said on Friday.

“Markets are projecting a brighter picture for the Asian economy in the coming quarters,” he said. “This should encourage investors to allocate more funds to Asian equities, particularly Indian, Indonesian and Malaysian equities.”

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Bank of Japan Governor Kazuo Ueda is scheduled to attend a special session of parliament this week to discuss the July 31 interest rate hike, which has rattled global markets. Hedge funds have turned bullish on the country’s currency for the first time since 2021, marking a sharp turnaround from the overwhelmingly negative sentiment seen among traders in early July.

Big investors, such as Vanguard, are still betting on a rise in interest rates in Japan in the coming months, even after the market’s tighter declines this year. If it rose for the second session there to trade at around 146 per dollar, as the nation’s equity fell for the first time in six days.

In China, authorities are expected to keep the 1-year and 5-year loan prime rates on hold on Tuesday after the People’s Bank of China last week promised further measures to support the economic recovery, while warning that it would not adopt “drastic” measures. .

The market will also monitor Chinese automakers including Xpeng Inc., Geely Automobile Holdings Ltd. and Xiaomi Corp., all of which should report higher vehicle sales. The challenge remains high, as competition heats up and the EU moves forward with tariffs.

Oil declined for the fourth time in five sessions as traders tracked US-led efforts to secure a 10-month-old Middle East ceasefire as the Russia-Ukraine war escalated. Gold wavered near all-time highs on hopes the Fed is edging closer to cutting rates. Elsewhere, iron ore suffered its worst week since early June on worries that a crisis in China’s steel industry will dampen demand, while supply from miners remained strong.

Here’s what’s coming:

• The US Democratic National Convention takes place on August 22, Friday

• Joint US-South Korea military drills begin on Monday

• The main lending rates of China, Canada and the euro area CPI on Tuesday

• Sweden and Turkey interest rate decisions, Tuesday

• Indonesia and Thailand interest rate decision, Wednesday

• US FOMC minutes from July 30-31 policy meeting, BLS annual wage revision, Wednesday

• Member of the Governing Council of the European Central Bank Fabio Panetta spoke in Rimini on Wednesday

• South Korea’s central bank’s interest rate decision on Thursday

• US Vice President Kamala Harris delivered her acceptance speech on the final night of the Democratic National Convention on Thursday

• Mexico’s central bank, the National Bank of Poland issued a monetary policy minute

• Malaysia’s CPI data, while Mexico and Norway publish GDP data

• Japan’s CPI data is due, and Bank of Japan Governor Kazuo Ueda attends a special session in Japan’s parliament to discuss a July 31 rate hike on Friday

• Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey spoke at the Kansas City Fed’s annual Jackson Hole symposium on Friday.

Some of the main movements in the market:

Savings

• S&P 500 futures were unchanged as of 13:38 Tokyo time

• Nikkei 225 futures (OSE) down 1.5%

• Japan’s Topix down 1%

• Australia’s S&P/ASX 200 was unchanged

• Hong Kong’s Hang Seng rose 1.1%

• Shanghai Composite rose 0.5%

• Euro Stoxx 50 futures rise 0.1%

currency

• Bloomberg Dollar Spot Index down 0.3%

• The euro rose 0.1% to $1.1040

• The Japanese yen rose 1.1% to 146.05 per dollar

• The offshore yuan rose 0.3% to 7.1417 per dollar

• The Australian dollar rose 0.3% to $0.6690

Cryptocurrencies

• Bitcoin fell 2% to $58,635.05

• Ether fell 1.1% to $2,638.08

Bond

• The yield on 10-year Treasuries was little changed at 3.88%

• Japan’s 10-year yield advanced three basis points to 0.900%

• Australia’s 10-year yield unchanged at just 3.93%

Commodity

• West Texas Intermediate crude fell 0.3% to $76.43 a barrel

• Spot gold fell 0.2% to $2,502.33 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Winnie Hsu.

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