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Asian stocks steady after declines in Wall Street: markets wrap

Asian stocks steady after declines in Wall Street: markets wrap
Chinese one-hundred yuan banknotes arranged in Hong Kong, China, on Tuesday, 18 October 2022. (Photo: Lam Yik/Bloomberg)

Asian equities traded within tight ranges after a drop in technology stocks led to small declines in US shares.

Hong Kong equities advanced as did those on the mainland while Japanese stocks were mostly flat. Contracts for US shares were also little changed. The mixed trading followed a listless US session on Wednesday with the S&P 500 ending lower and the tech-heavy Nasdaq 100 falling 0.8% as Nvidia Corp. and Tesla Inc shares slipped. 

Nippon Steel Corp. erased its gains amid a report that President Joe Biden is expected to soon release a statement of concern about the company’s proposed purchase of United States Steel Corp. US Steel dropped as much as 15%, its biggest intraday loss since June 2020.

Shares related to copper miners in Asia rose after the metal jumped to an 11-month high on potential capacity cuts at Chinese smelters.

The Bank of Japan was again in the spotlight. Officials are considering an end to exchange-traded fund purchases the central bank began in 2010, according to people familiar with the matter. The move comes as inflation in Japan rises toward the BOJ’s target.

In China, investors are assessing the fallout of the nation’s struggling retail developers. Country Garden Holdings Co. missed a coupon payment on a yuan bond for the first time while China Vanke Co. is in talks with banks on a debt swap that would help it stave off its first bond default.

The moves in Chinese stocks came after officials pledged central government funds to encourage consumers and businesses to replace old equipment and goods, a pillar of its plan for economic growth of about 5% this year.

FX lethargy

Treasuries steadied in Asia after selling off on Wednesday with the 10-year yield rising four basis points. An index of the dollar was steady after a decline in the previous session, and the yen was marginally stronger at around 147 per dollar.

Markets are getting very comfortable with a soft-landing scenario lubricated by almost-synchronised global central bank easing, according to Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore. “At this point, it’s fair to say that nothing much is really happening in the FX space, except perhaps for the yen,” he wrote in a note. “We’ll need some sort of global market shock to shake FX out of its lethargy.”

US data due later in the week will offer further signs of the health of the US economy and the effect of monetary policy. Retail sales, producer prices, jobless claims and consumer sentiment figures are among the reports due this week, ahead of the Federal Reserve’s interest rate decision next week.

Also in focus is ByteDance Ltd. after the US House of Representatives passed a bill to ban TikTok in the US unless its Chinese owner sells the video-sharing app. 

Federal Reserve researchers said short positions in Treasury futures held by leveraged funds — known as the basis trade — could be as little as a third of commonly used estimates. That’s good news for bond investors given the Fed researchers found the leveraged nature of the trade can increase Treasury market fragility.

In commodities, oil held the biggest gain in about five weeks after US crude stockpiles shrunk and Ukraine attacked another Russian refinery. Gold rose for a second day, remaining close to its intraday record of $2,195.15 that was reached on Friday.

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