Asia Stocks Rise on China and Fed Outlook Hopes: Markets Wrap

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(Bloomberg) — Asian stocks rose as traders bet that China’s latest property stimulus measures will aid the economy and data suggested that US interest rates may be approaching a peak.

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Hong Kong benchmark indexes outperformed the region as investors resumed trading after a closure on Friday. Real estate stocks extended their advance, with China’s property shares gauge rising above 5% on stimulus measures taken to bolster the sector. Other major indexes also gained, putting a regional equity benchmark on track for its highest close since mid-August.

Futures for US equities steadied after the S&P 500 Index had its best week since June last week. Expectations that supply cuts by OPEC+ leaders will tighten the market sent West Texas Intermediate crude to its eighth straight day of advance and heading for the highest close since November. Brent also rose, moving toward $90. US markets are shut Monday for the Labor Day holiday.

The Chinese government last week said it will allow the nation’s largest cities to cut down payments for home buyers and encouraged lenders to lower rates on existing mortgages. The nationwide minimum down payment will be uniformly set at 20% for first-time buyers and 30% for second-time purchasers. Beijing and Shanghai followed through by lowering mortgage requirements for some homebuyers, while home transactions in China’s biggest cities soared over the weekend.

The recent measures have the potentials to “help restore homebuyers’ sentiment, moderately alleviate household interest payment pressure and pave the way for 4Q sales pick-up beyond seasonality,” according to Yi Wang, an analyst at Goldman Sachs Group Inc.

Sentiment was further propped up by news that distressed Chinese builder Country Garden Holdings Co. won approval from creditors over the weekend to extend a maturing yuan bond. Its shares jumped. However, the developer has just days to avoid default on some dollar bonds.

The dollar ticked lower after gaining Friday against major peers. There is no trading of cash Treasuries due to the US holiday.

Cooling

This year’s US stock market rally is strong enough to withstand another leg higher for bond yields, according to the latest Markets Live Pulse survey. Also, just over 50% of survey takers expect the positive relationship between equities and bonds to turn negative by the end of this year, reverting to the long-term trend of this century.

Friday’s US jobs report showed a labor market undergoing a controlled cooling, illustrated by solid hiring, slower earnings growth and more people returning to the workforce. The moderation gives the Fed room to pause rate increases this month while keeping options open for another hike later in the year.

Meanwhile, as softer economic data weigh on Treasury yields, stock market participants seem willing to bid valuations back up on the view that the late-cycle environment is being extended once again, according to Morgan Stanley’s Mike Wilson.

“With inadequate evidence to affirm or contradict that view, price remains the governing factor for many investors’ conclusions about where we are in the cycle,” he wrote in a note. “We continue to recommend a more defensive growth posture in one’s portfolio given that growth fears or financial stress could return at any moment in a late-cycle environment, particularly as we enter September.”

Elsewhere, key rate decisions for central banks are scheduled in Australia and Malaysia this week with rates expected to remain on hold.

Traders will also be monitoring China’s trade and inflation data due later this week that will likely signal that the economy’s recovery remains fragile, keeping pressure on policymakers to roll out more stimulus.

Key events this week:

  • Labor Day holiday in US and Canada, Monday

  • ECB President Christine Lagarde makes speech at seminar organized by the European Economics & Financial Center, Monday

  • Australia current account, rate decision, Tuesday

  • Japan household spending, Tuesday

  • China Caixin services PMI, Tuesday

  • Eurozone S&P Global Eurozone Services PMI, PPI, Tuesday

  • US factory orders, Tuesday

  • ECB President Christine Lagarde chairs panel focused on central banks and international sanctions at ECB Legal Conference, Tuesday

  • Australia GDP, Wednesday

  • Eurozone retail sales, Wednesday

  • Germany factory orders, Wednesday

  • US trade, Wednesday

  • Canada rate decision, Wednesday

  • Bank of England Governor Andrew Bailey testifies to the UK parliament’s Treasury Select Committee, Wednesday

  • Federal Reserve issues Beige Book economic survey based on reports from Fed’s 12 district banks, Wednesday

  • Boston Fed President Susan Collins speaks on the economy at New England Council in Boston, Wednesday

  • Dallas Fed President Lorie Logan at community listening session to explore economic issues facing the Lubbock area, Wednesday

  • China trade, forex reserves, Thursday

  • Eurozone GDP, Thursday

  • US initial jobless claims, Thursday

  • Bank of Canada Governor Tiff Macklem to speak on the Economic Progress Report in Calgary, Thursday

  • New York Fed President John Williams participates in moderated discussion at the Bloomberg Market Forum, Thursday

  • Atlanta Fed President Raphael Bostic speaks on economic outlook at Broward College in Davie, Florida, Thursday

  • Japan GDP, Friday

  • France industrial production, Friday

  • Germany CPI, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 11:32 a.m. Tokyo time. The S&P 500 rose 0.2% on Friday

  • Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.1%

  • Japan’s Topix rose 0.8%

  • Australia’s S&P/ASX 200 rose 0.5%

  • Hong Kong’s Hang Seng rose 2.7%

  • The Shanghai Composite rose 1.2%

  • Euro Stoxx 50 futures rose 0.3%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro was little changed at $1.0786

  • The Japanese yen was little changed at 146.10 per dollar

  • The offshore yuan rose 0.1% to 7.2609 per dollar

  • The Australian dollar rose 0.3% to $0.6473

Cryptocurrencies

  • Bitcoin fell 0.5% to $25,914.78

  • Ether fell 0.6% to $1,633.28

Bonds

Commodities

  • West Texas Intermediate crude rose 0.2% to $85.68 a barrel

  • Spot gold rose 0.3% to $1,945.61 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Cheng.

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