The Nikkei 225 Stock Average displayed on a rotating-cube screen in an atrium of the Kabuto One building, next the Tokyo Stock Exchange, in Tokyo, Japan, on Tuesday, June 7, 2022. Japan equities were mixed after the yen slid to a 20-year low versus the dollar as the gap between domestic and US yields widened. Photographer: Akio Kon/BloombergStocks in Japan were mixed, while those in South Korea and Australia fell. Benchmark indexes in Hong Kong and mainland China swung to gains, with consumer-related stocks becoming the best performers in the CSI 300 Index after the Chinese government released some measures to support consumption, including on home appliances and car purchases.
Contracts for US equities traded within a narrow range, after the tech-heavy Nasdaq 100 index dropped the most in nearly five months on Thursday.
The declines in US stocks are hitting the pause button on this year’s blistering rally that’s seen the S&P 500 rise 18%, and the Nasdaq 100 gain 41%, against a shaky economic outlook during the Fed’s aggressive tightening campaign.
Some investors expect to see even more support measures in China at the end of the month.
“Additional stimulus measures may come through after the Politburo meeting (28-30 July), but the scale and targeted areas remain to be confirmed,” Morgan Stanley strategists, including Laura Wang, wrote in a note.
However, as more prudent and balanced consideration of policy choices could result in longer decision-making and action-taking, “we see further downward pressure on corporate earnings through the next one to two quarterly results seasons”, they said.
The offshore yuan was little changed on Friday after the People’s Bank of China once again set its daily fixing for the currency at a level that was stronger than estimated. The offshore yuan had jumped on Thursday after the central bank stepped up its support.
“Once our view of the Chinese growth rebound picks up,” the yuan should appreciate, Abhilash Narayan, senior investment strategist at Standard chartered Wealth Management, said on the offshore yuan on Bloomberg Television. “We have a target of 7.0 to 7.08 for CNH on a 12-month horizon.”
The dollar and Treasuries were little changed in Asia. An unexpected pullback in weekly initial jobless claims prompted traders to price in higher odds of a quarter-point rate hike beyond the Federal Reserve’s meeting next week, boosting the dollar and yield on the 10-year Treasury on Thursday.
The yen erased its gains. The currency earlier rose after Japan reported inflation that was slightly higher than estimates in June. The latest data will present a challenge for Bank of Japan officials when they meet next week as Governor Kazuo Ueda continues to back the case for persistent monetary stimulus.
The Bloomberg Commodity Index is set for its third weekly gain, following a surge in wheat prices after an escalation of tensions between Russia and Ukraine in the Black Sea. Natural gas futures in Europe and the US are also set to notch near 10% gains this week as extreme heat boosts power demand for air conditioning. Oil is set to eke out a fourth weekly gain while gold has retreated from a two-month high on the recent strength of the dollar.
“In the last 24 hours alone there has been talk of a worsening of the conflict in Ukraine, a further slowdown in China and major US banks facing significant real estate losses,” Lewis Grant, senior portfolio manager at Federated Hermes, wrote in a note. “Each of these threats, along with uncountable unknowns, has the potential to halt the sentiment rebound in its tracks.” DM
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