Business Maverick

Business Maverick

Bond losses extend to Asia, Chinese stocks gain: markets wrap

Bond losses extend to Asia, Chinese stocks gain: markets wrap
Stock market information displayed on a TV at the Nasdaq MarketSite in New York, US, on Wednesday, 15 June 2022. (Photo: Michael Nagle / Bloomberg via Getty Images)

Asian bonds fell on Thursday, echoing selling pressure in Treasuries in the prior session. Chinese shares rose as the country released stronger-than-expected trade data.

The 10-year benchmark yields for Australia, New Zealand and Japan all increased, while those on US sovereign debt held Wednesday’s increase after a $42-billion sale of 10-year notes received tepid demand. 

The rise in Japanese yields followed a hawkish-sounding summary of opinions from the central bank’s April meeting. Bank of Japan members discussed the potential to cut bond purchases as well as the path for future rate hikes.

The yen was steady after touching a weekly low earlier. Japan’s top currency official, Masato Kanda, said the country would be ready to take appropriate action when necessary but refrained from confirming official support in recent weeks. A dollar index steadied following a third session of gains.

“The interest rate differential does not support a stronger yen and the Bank of Japan does need to think about closing that gap,” Charlie Jamieson, chief investment officer at Jamieson Coote Bonds Pty Ltd., told Bloomberg Radio. That said, “we don’t feel that there is a rampant hiking cycle” in Japan.

Stocks were mixed in Asia, with gains in Japan, Hong Kong and China and declines in Australia and South Korea. US futures edged lower after the S&P 500 and Nasdaq 100 indexes ended Wednesday largely flat, weighed down by losses in megacaps following a string of underwhelming corporate updates.

A key gauge of Chinese shares listed in Hong Kong rose as much as 1.4% after a two-day losing streak, led by tech and property firms. The gains came after data showed both exports and imports beat consensus forecasts in April in the world’s No. 2 economy. 

In a sign of continued distress among China’s weaker developers, Country Garden Holdings Co. said it can’t make interest payments on yuan bonds as an initial deadline comes due.   

US-listed shares in Arm Holdings PLC fell as much as 10% in late trading following a tepid annual forecast. Intel shares also dropped after the US revoked licences that allowed the firm to sell chips to Huawei Technologies Co. Airbnb Inc shares fell in post-market trade following signs of slowing growth.

Elsewhere in Asia, Malaysia will hand down a monetary policy decision, while markets in Indonesia are closed. Japan’s latest wage figures showed pay gains have now lagged inflation every month for two years.

Investors hesitant

Lack of conviction among investors to buy into the recent bounce in US stocks shows the market is far from turning fully bullish, said Citigroup Inc. strategists. The recent unwind of short positions has left the S&P 500 close to one-sided net long, but investors appear hesitant to add to the existing bullish positions, a team led by Chris Montagu noted.

“Flows tell a story of limited enthusiasm with a trickle of new long positions and only marginal increase in risk appetite,” Montagu said.

Following a pullback last month, equities resumed their advance in early May as solid corporate earnings bolstered sentiment and speculation grew that the Federal Reserve will be able to cut rates this year. The recent rally brought the S&P 500 about 1% away from its all-time high. 

Inflation figures due next week will offer fresh insights about the US economy after employment data out Friday showed the labour market is cooling. Fed Bank of Boston president Susan Collins signalled on Wednesday that interest rates will likely need to be held at a two-decade high for longer than previously thought to damp demand and reduce price pressures.

“Despite the lack of good news on inflation, there is a silver lining for patient investors,” said Mark Hackett at Nationwide. “As the Federal Reserve extends the timeline for interest rate cuts, historical data shows that longer Fed pauses often correlate with better equity returns. This should give investors reasons to be optimistic.”

In commodities, West Texas Intermediate rose by the most in almost two weeks Wednesday. The Biden administration raised the price it’s willing to pay to refill the country’s emergency oil reserves, which have dwindled near the lowest in four decades. Gold prices were flat at around $2,309 per ounce.

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