Business Maverick

Business Maverick

Asia shares rise on big tech rally; yields steady: markets wrap

Asia shares rise on big tech rally; yields steady: markets wrap
The Morgan Stanley building in Times Square New York on Tuesday, 9 June 2020. (Photo: Nina Westervelt/Bloomberg)

Asian equities advanced on Tuesday following a rally in big tech that spurred a rebound on Wall Street, though an overnight selloff in Treasuries kept risk sentiment in check.  

MSCI Inc.’s Asia Pacific equity gauge rose 0.6% and the Hang Seng Index was set to snap a seven-day run of losses. Shares of Asian electric vehicle makers gained after Tesla Inc. was up the most since March on Monday, while those related to semiconductors climbed on growing optimism surrounding Nvidia Corp.’s earnings, due on Wednesday.

China’s call for more credit support on car purchases drove the nation’s consumer shares higher as well. In Australia, BHP Group Ltd. fell after the world’s biggest miner reported a 37% decline in full-year profit.

US stock futures were flat after the S&P 500 Index halted a four-day drop on Monday and the Nasdaq 100 Index rose about 1.7%. In late US hours, SoftBank Group Corp. semiconductor unit Arm filed for what is set to be this year’s largest US initial public offering. 

Treasury yields steadied after Monday’s selloff. Investors are awaiting a key speech later in the week by Federal Reserve chair Jerome Powell as signs of economic strength bolster bets for elevated rates.

The yield on 10-year inflation-protected Treasuries on Monday pushed over 2% for the first time since 2009. Not long after, the yield on 10-year notes without that protection had hit a level last seen in late 2007.

The 10-year bond yield in Japan rose to the highest since 2014, raising speculations that the Bank of Japan may come into the market with an unscheduled bond-buying operation to slow gains. Yields were also higher in Australia and New Zealand. 

The dollar weakened against most of its G10 peers. The yen strengthened, but remained near a level that triggered last year’s first yen-buying intervention since 1998, keeping traders focused on potential comments from currency officials. 

The offshore yuan steadied after the People’s Bank of China implemented the strongest fixing on record on the currency as the central bank continued its battle against yuan bears.

Hawkish hold

Powell will speak on Friday at the Kansas City Fed’s Jackson Hole Economic Policy Symposium after officials last month lifted rates to a range of 5.25% to 5.5%, the highest level in 22 years. Minutes from the gathering showed policymakers still saw significant risks that inflation could remain higher than they expect — which could keep rates elevated.

“Each incremental hike that they have from here just raises the risk that we have a much sharper slowdown in 2024 and perhaps even a recession,” Lori Heinel, chief investment officer at State Street Global Advisors, said on Bloomberg Television. “So as long as inflation remains contained, we think that they will take a pause here.”

Two-thirds of 602 respondents in Bloomberg’s latest Markets Live Pulse survey say the Fed has yet to conquer inflation. And over 80% of those surveyed said Powell’s Jackson Hole speech will reinforce the message of a hawkish hold.

The speeches from Fed chiefs at the Jackson Hole conference have typically buoyed stocks since the turn of the millennium, data compiled by Bloomberg Intelligence show. But last year equities slumped 3.2% in the week following Powell’s remarks after he warned of keeping policy restrictive to battle inflation.

Meantime, two of Wall Street’s top strategists are at odds about the outlook for US stocks following a three-week run of declines as debate rages over whether the economy can avoid a recession.

While Morgan Stanley’s Michael Wilson — a stalwart equity bear — says sentiment is likely to weaken further if investors are starting to “question the sustainability of the economic resiliency,” his counterpart at Goldman Sachs Group Inc., David Kostin, says there’s room for investors to further increase exposure if the economy stays on course for a soft landing.

Elsewhere, oil and gold were little changed. DM

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