Signage for Hong Kong Exchanges and Clearing Ltd at the Hong Kong Stock Exchange in Hong Kong, China, on Tuesday, Sept. 17, 2024. (Photo: Lam Yik /Bloomberg via Getty Images) Shares in Japan, Australia and South Korea declined, weighing on an index of the region’s equities, which headed for its worst monthly performance since August 2023. Mainland Chinese shares and those in Hong Kong rose, as investors digested a report showing monthly Chinese manufacturing data registered its first expansionary reading since April.
“We still have to see a little bit more policy easing to make households more comfortable in consuming and for the private corporates to be convinced to put more investment on the table,” Xiaojia Zhi, chief China economist for Credit Agricole, said on Bloomberg Television.
The BOJ kept its benchmark interest rate unchanged after uncertainties increased over the outlook of the economy and the stability of the government after the ruling coalition suffered its worst electoral result since 2009. The yen swung between gains and losses following the decision, remaining around the 153-to-the-dollar level.
US futures declined, weighed down by post-market losses for Microsoft Corp. and Meta Platforms Inc. after their earnings results. The dollar resumed a rally in Asian trading and was on pace for its best month in over two years.
A measure of one-week implied volatility on the Bloomberg Dollar Spot Index rose on Wednesday to the highest since December 2022, when recession fears briefly raced through financial markets. That indicates traders are preparing for large swings in the currency against major peers like the euro, yen, Chinese yuan and Mexican peso, pushing up the cost of options that protect against such moves.
Treasuries rose slightly in Asian trading, while yields on Australian and New Zealand sovereign debt advanced. A measure of the global bond market fell to the lowest level in almost three months on Wednesday.
Traders trimmed bets on policy easing after data showed that the US economy expanded at a robust pace in the third quarter, helped along by accelerating household purchases and defence spending. A measure of underlying inflation rose 2.2%, roughly in line with the Fed’s target.
The prospect of a Donald Trump victory in next week’s US presidential election prompted some to voice concerns over inflation.
“Who becomes president changes the perspective of the investment cycle,” Daniel Yoo, head of asset allocation, Yuanta Securities, said on Bloomberg Television, highlighting the potential effects of greater tariffs and lower corporate taxes under Trump.
“That will probably accelerate the process of inflation pressure and therefore the lowering of interest rates may be taken at a slower pace or not even happen,” Yoo said.
The US stock market’s fundamental flows are turning increasingly bullish, which should give equities a fresh jolt once the US election is out of the way.
The elements of a rally are building up — stocks are entering a historically strong season and companies are starting to buy back shares. Investors may be over-hedged for the series of earnings, US election and central bank risks looming through early November. And with market volatility declining from the early-August high, systematic investors and options desks may be forced to snap up stocks.
Elsewhere in Asia, Taiwan has suspended trading on its stock exchange Thursday as a powerful typhoon barrels toward the archipelago.
Corporate earnings took centre stage in the region, with Samsung Electronics Co.’s chip operations missing analysts’ expectations for profit. In China, BYD Co.’s shares slumped even after it beat Tesla Inc. on quarterly revenue for the first time, with traders more focused on its net sales per vehicle disappointing on estimates.
Oil edged higher on Thursday, extending its gains from the previous session. Gold was steady at around $2,787 per ounce early on Thursday after touching a fresh record in the prior session. Demand for the precious metal was partly supported by the uncertainty posed by next week’s vote.