Business Maverick

Business Maverick

Japan stocks add to gains on GDP data; yuan falls: markets wrap

Japan stocks add to gains on GDP data; yuan falls: markets wrap

Japan equities extended their advance as better-than-expected economic growth fuelled optimism over the market outlook. The offshore yuan weakened.

Japanese stocks led gains among major benchmarks in Asia, after the Topix Index closed at the highest level since 1990 on Tuesday. The nation’s markets may be on the cusp of a rare bull market, according to Goldman Sachs Group Inc. The government said on Wednesday gross domestic product expanded at the fastest pace in three quarters as a further easing of pandemic regulations boosted consumer spending. 

The offshore yuan, meanwhile, fell to as weak as 7.0097 to the US currency Wednesday, the first time it has breached the 7 level since late December as economic data continued to disappoint. Shares in mainland China fluctuated, while the Hang Seng China Enterprises Index dropped as much as 0.9%.

A slew of weaker-than-expected data from China, including industrial output and retail sales, has raised concerns over the strength of recovery in the world’s second biggest economy and spurred calls for more policy stimulus to bolster growth. 

“Right now when we’re talking to both offshore and offshore investors, the sentiment is actually quite weak,” Marcella Chow, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “We do hope the Chinese central banks or actually authorities might change from more the wait-and-see to a bit more proactive easing.”

An earnings release by Tencent Holdings Ltd. later on Wednesday may aid sentiment in China. The tech giant is expected to post its biggest rise in quarterly revenue since 2021 on a gradual recovery in spending and advertising.

Shares advanced in South Korea and fell in Australia. US stock futures edged higher in Asia after the Nasdaq 100 closed up just 0.1% and the broader S&P fell, following a rapid decline in the final minutes of the session. President Joe Biden and House Speaker Kevin McCarthy were hopeful when asked whether a deal on the debt-ceiling could be reached within days to end a stalemate ahead of a potential US default.

Distorted bills

The market impact of debt-ceiling concerns has been largely confined to distorted Treasury bill yields, with those maturing in early June trading at higher yields, according to Andrew Hollenhorst, chief US economist at Citigroup Inc.

“When a deal is passed to push the debt ceiling out, Treasury will look to rapidly rebuild its cash balance,” he wrote in a note. “That means significant issuance of T-bills and a drain of private-sector liquidity as cash currently in bank reserves and the Fed’s reverse repo program flows into Treasury’s cash account.”

Treasuries and the dollar were both little changed in early Asian trade. That was after US government debt fell across the curve on Tuesday, with the 30-year yield climbing to 3.90% — the highest since the run-up to the banking turmoil that erupted in early March. 

New Zealand bond yields rose ahead of the nation’s budget, which is anticipated to show rising debt and wider deficits. Australian bonds also fell. 

Richmond Federal Reserve president Thomas Barkin said he was still looking to be convinced that inflation has been defeated and that he’d support raising rates further if needed. Cleveland Fed President Loretta Mester said the central bank is unable to do much about slow long-term economic growth, but can “do its part” by curbing prices.

Elsewhere, oil steadied amid China’s lackluster recovery that overshadowed a bullish outlook from the International Energy Agency and positive US data. Gold remained below $2,000. BM/DM

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