Hong Kong Stocks Slide into Holiday, Japan Gains: Markets Wrap

(Bloomberg) — Chinese equities in Hong Kong slumped for a third straight day amid public holidays in many markets in the region, including the mainland. Japanese stocks edged higher.

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Japan’s Nikkei 225 index rose 0.3%, paring earlier gains of as much as 1.2%, while the Hang Seng China Enterprises Index dropped 1%. The MSCI Asia Pacific Index is on track for its third straight weekly gain amid a flurry of stimulus announcements from China as it attempted to stem an equity market slump. Both gauges are higher for the week thanks to a big gain on Tuesday amid optimism around state support.

Investors are now closely watching for annual revisions to monthly US inflation data, after last year’s adjustments cast doubt on the Federal Reserve’s progress in taming consumer prices. Markets closed early Friday in Hong Kong and Singapore, and are shut in mainland China, Taiwan, South Korea, Indonesia, the Philippines and Vietnam.

Stocks are falling in Hong Kong as there is “no further positive policy from Mainland, and no stock connect inflows,” said Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd. There seems to be limited buying interest in Hong Kong “other than those from southbound stock connect recently,” he added.

China’s efforts to arrest a $7 trillion stock market rout are evoking memories from 2015, when Beijing took drastic steps to stem a crash. But, this time, investors say, the problems are much more entrenched.

“What we need in China in terms of catalysts is a large coordinated fiscal easing targeting demand,” Florian Neto, head of Asia multi-asset at Amundi Hong Kong Ltd., said on Bloomberg Television. “What we have is market stabilization, but it’s not tackling the fundamental issues in the Chinese economy.”

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Australian equities were little changed and Japanese stocks rose, with the weaker yen offering some support. The currency steadied after slipping 0.8% against the greenback on Thursday, in the wake of comments from a Bank of Japan deputy governor suggesting the central bank will be in no rush to shift its easy policy settings. An index of the dollar was steady.

Japan-listed SoftBank Group Corp. rallied as much as 10% after exceeding net income forecasts in its latest quarterly results, and from further gains for Arm Holdings Plc, in which it owns a stake. Nissan shares slipped more than 9% after the company missed profit estimates.

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US futures were little changed. The S&P 500 closed 0.1% higher Thursday, just below 5,000 — a threshold it hit briefly near the end of the session. The closing level set a fresh high. The Nasdaq 100 rose 0.2%.

“Our base case remains for a soft landing for the US economy, with the S&P 500 ending the year around current levels,” Solita Marcelli at UBS Global Wealth Management said in a Thursday note. “However, recent economic data have highlighted the potential for a period of continued stronger growth, tame inflation, and swifter monetary easing. In this event, we believe the S&P 500 has the potential to rise to around 5,300 this year.”

Treasuries were little changed in Asian trading after a decline on Thursday. Selling came even after the US government sold $25 billion in 30-year bonds at a lower-than-expected yield, in a sign of healthy demand. The 10-year yield rose three basis points Thursday and has added 13 basis points this week as investors adjust interest rate forecasts on strong economic data and comments from central bank policymakers.

Federal Reserve Bank of Richmond President Thomas Barkin was the latest to reiterate the central bank has time to be patient before cutting rates. Fresh data on Thursday also underscored US economic resilience. Jobless claims fell just shy of consensus predictions, in a sign the labor market remains strong.

Elsewhere, New Zealand yields and the currency climbed after ANZ Bank New Zealand Ltd. forecast that the central bank will raise interest rates twice more this year.

Inflation Revisions

Interest rate forecasts could receive another jolt later Friday when the US revises monthly inflation data. Investors will be watching closely after last year’s updates cast doubt on the Fed’s progress in taming consumer prices.

“CPI revisions could throw cold water on the recent good inflation numbers — but this is a wonky number,” said Andrew Brenner at NatAlliance Securities. “We think the next move comes off the CPI number next Tuesday.”

Oil rallied amid doubts over a potential cease-fire in the Israel-Hamas war, while Bitcoin reached a one-month high above $46,000.

“Analyzing 10-day returns after the Lunar New Year, Bitcoin has only experienced negative returns twice since 2011 and none since 2014, boasting an average return of over 10%,” said Sean Farrell, head of digital-asset strategy at Fundstrat, in a note Thursday.

Key events this week:

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 5:43 a.m. London time

• Nasdaq 100 futures were little changed

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index fell 0.2%

• The MSCI Emerging Markets Index fell 0.4%

• S&P 500 futures were little changed

• Hang Seng futures fell 1.1%

• Nikkei 225 futures (OSE) rose 0.4%

• Japan’s Topix was little changed

• Euro Stoxx 50 futures fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0772

• The Japanese yen was little changed at 149.38 per dollar

• The offshore yuan was little changed at 7.2124 per dollar

• The British pound was little changed at $1.2618

Cryptocurrencies

• Bitcoin rose 1.9% to $46,201.51

• Ether rose 1% to $2,450.01

Bonds

• The yield on 10-year Treasuries was little changed at 4.15%

• Germany’s 10-year yield advanced four basis points to 2.35%

• Britain’s 10-year yield advanced six basis points to 4.05%

• Australia’s 10-year yield advanced two basis points to 4.13%

Commodities

• Spot gold was little changed

• West Texas Intermediate crude fell 0.1% to $76.13 a barrel

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Abhishek Vishnoi.

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