Business Maverick

Business Maverick

Hong Kong tech rallies, yen hits three-week high: markets wrap

Hong Kong tech rallies, yen hits three-week high: markets wrap
The flag of China marking the 26th anniversary of Hong Kong's return to Chinese rule hangs on a bridge in Hong Kong, China, on 29 June 2023. (Photo: Lam Yik / Bloomberg)

Equities in Asia climbed amid a rally in technology stocks, and the yen surged, ahead of crucial US jobs data due later on Friday.

Hong Kong stocks gained for a ninth straight session as tech rallied. The Hang Seng Tech index rose as much as 4.1%, compounding a 4.5% advance on Thursday, as Alibaba Group, Tencent and JD.com touched fresh 2024 highs. Shares in Australia and South Korea rose. Markets in Japan and mainland China are closed for holidays. 

“Even after the sharp rally, valuations for the China tech stocks are still well below historical average” and compared with global peers, said Vey-Sern Ling, managing director at Union Bancaire Privee. “The strong performance in the past two weeks is probably attracting more fund inflows for fear of missing out.”

The US equity futures rose after Apple gained post-market on better-than-expected results.

The yen touched a three-week high against the greenback in early Friday trading and headed for its best week since December 2022. The currency has likely gotten official support, with estimates indicating Japan spent more than $20-billion in its latest round of intervention. 

The suspected intervention “appears to have had only limited impact and is unlikely to ultimately reverse the direction of the USD/JPY rate”, said a team from Goldman Sachs Group Inc. including Jenny Grimberg. 

An index of the dollar weakened after dropping by the most since December on Thursday, reflecting lower US yields as Treasuries rallied across the curve. The US 10-year yield fell five basis points to 4.58%, while the policy-sensitive two-year yield dropped nine basis points. Treasuries trading in Asia is closed due to the holiday in Japan. Australian and New Zealand yields fell on Friday.

The moves come ahead of US nonfarm payrolls data that will help identify the path forward for Federal Reserve policy. Economists surveyed by Bloomberg forecast a 240,000 gain in payrolls, which would be the slowest pace since November.

The Fed decided on Wednesday to leave the target range for the benchmark rate at 5.25% to 5.5% following a slew of data that pointed to lingering price pressures. Yet chair Jerome Powell said it’s unlikely that the Fed’s next move would be to raise rates.

“While the Fed appears to have all but ruled out a rate hike, it also made clear it’s willing to keep rates higher for longer,” said Chris Larkin at E*Trade from Morgan Stanley. “The markets will be hungry for any data suggesting the economy isn’t heating up any more than it did in the first quarter.”

A survey conducted by 22V Research shows that 30% of the investors polled think Friday’s jobs report will be “risk-on,” 27% expect a “risk-off” reaction, and 43% said “mixed/negligible.” Among the labour indicators, the tally showed investors will be paying the most attention — by far — to average hourly earnings. 

The options market is betting that stocks will swing widely after Friday’s US jobs report, which traders expect will offer more clarity on how much the Fed may cut interest rates this year.

The S&P 500 is expected to move 1.2% in either direction after the release, based on the cost of at-the-money puts and calls expiring on Friday, according to Stuart Kaiser, Citigroup Inc.’s head of US equity trading strategy. That figure, based on the prices of S&P straddles as of Wednesday’s close, is the largest implied swing ahead of an employment report since March 2023, he said.

In Asia, data set for release includes Thai inflation and retail sales for Hong Kong and Singapore. 

Oil edged higher after ending the prior session little changed. Gold declined.

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