A mine worker walks through an underground tunnel at a gold mine in Westonaria, South Africa, on 9 March 2017. (Photo: Waldo Swiegers / Bloomberg via Getty Images) | A worker drives a forklift truck in a warehouse in Springs, South Africa, on 13 August 2020. (Photo: Waldo Swiegers / Bloomberg via Getty Images) Equities in Japan and Hong Kong rose, while those in mainland China stocks fluctuated. Baidu and SenseTime, which are among the companies that have received approval to roll out generative artificial intelligence services, were among the leaders.
Manufacturing activity in China contracted less than forecast in August, supporting the yuan, which strengthened on the news. The services PMI showed slowing expansion. The data follows a series of actions from authorities to buttress China’s economy in the face of slowing growth and ebbing confidence among businesses, investors and consumers. The Australian dollar also gained after the report.
Australian shares were little changed, partly weighed down by Qantas Airways, which fell on news of legal action. South Korean equities edged lower.
The S&P 500 advanced for a fourth day on Wednesday, extending this week’s gains to 2.5%. The tech-heavy Nasdaq 100 has climbed 3.5% this week.
The recent stock gains have only partly unwound broad-based losses for August. The S&P 500 is still heading for the worst month since February, while the Nasdaq 100 is set for the largest decline this year. Asian and global stocks are also on pace for the biggest monthly losses since February.
Australian and New Zealand bonds rose after Treasuries made modest gains on Wednesday, helped by the weaker-than-expected data. US gross domestic product rose at a 2.1% annualised pace in the second quarter, lower than the government’s previous estimate. An industry gauge of employment showed fewer jobs were added than economists forecast, while a measure of consumer confidence was also softer than expected.
The underwhelming numbers supported predictions for the Fed to ease back on interest-rate hikes. Swap contracts are now pricing in less than a 50% chance of another quarter-point increase this year. The dollar retreated slightly while the yen strengthened.
Bad is good
“Investors are reacting with a ‘bad news is good news’ approach, betting that a slowing economy will lead to a less aggressive Federal Reserve,” said Mark Hackett, chief of investment research at Nationwide Funds Group. “This has calmed investors, but adds an element of risk if the pendulum continues to swing, as an earnings recovery is critical for a continued strong market.”
Additional signs of official support for the world’s second largest economy emerged on Wednesday. The People’s Bank of China is drafting preliminary policies to give private businesses better access to funding, local media reported.
Elsewhere, Country Garden Holdings Co. signalled it may default on its debt after the embattled Chinese developer posted a record first-half loss of almost $7-billion. However, China builders including Country Garden rallied as tier-one cities Guangzhou and Shenzhen relaxed home-purchase restrictions.
In US corporate news, Apple is testing the use of 3D printers to produce smartwatch components, according to people with knowledge of the matter. US prosecutors are investigating a Tesla Inc. plan to purchase hard-to-get construction materials. Visa Inc. and Mastercard Inc. shares rose on plans to boost the fees charged to retailers.
The price of oil clung to gains in early Asian trading after ending Wednesday with its fifth daily advance. Gold edged higher after a string of gains this week. Bitcoin traded above $27,000. DM