(Bloomberg) — Asian stocks rose as traders bet that China’s latest asset stimulus measures will help the economy and suggested that U.S. interest rates may be nearing record highs.
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Hong Kong’s benchmark indices outperformed regional ones as investors resumed trading after the close on Friday. Real estate stocks rose more than 5% on stimulus measures taken to strengthen the sector. Other major indexes also gained, sending the regional equity benchmark to its highest close since mid-August.
U.S. stock futures were flat after the S&P 500 index last week had its best week since June. Expected supply cuts by OPEC+ leaders sent the market for West Texas Intermediate crude forward to its eighth straight day of consolidation and near its highest since November. Brent also rose, moving to $90. US markets are closed Monday for the Labor Day holiday.
The Chinese government last week said it would allow the country’s biggest cities to lower payments for homebuyers and encourage lenders to lower rates on existing loans. The national minimum down payment will similarly be 20% for first-time buyers and 30% for second-time buyers. Home sales in China’s biggest cities picked up over the weekend, with Beijing and Shanghai following suit in easing mortgage requirements for some home buyers.
Goldman Sachs Group Inc. analyst Yi Wang said the latest measures have the potential to “restore homebuyer sentiment, somewhat ease domestic interest payment pressures and pave the way for a 4Q sales pick-up.”
Chinese builder Country Garden Holdings Co., which has been anxious to extend yuan bonds, was further buoyed by news that it won approval from lenders over the weekend. The stocks jumped. However, there are only days left for the developer to avoid default on some dollar bonds.
The dollar fell after gains against major peers on Friday. No Treasuries trading due to US holiday.
Cooling down
This year’s U.S. stock market rally is strong enough to weather another leg for bond yields, according to the latest Markets Live Pulse survey. Also, more than 50% of survey participants expect the positive correlation between stocks and bonds to turn negative later this year, a return to the long-term trend of this century.
Friday’s U.S. jobs report showed a controlled cooling of the labor market, with strong hiring, moderate income growth and more people returning to the workforce. It will give the Fed room to freeze rate hikes this month, while leaving options open for another hike later in the year.
Meanwhile, as soft economic data weighs on Treasury yields, stock market participants appear willing to bid up valuations on the view that the late-cycle environment is being extended again, said Morgan Stanley’s Mike Wilson.
“In the absence of sufficient evidence to support or refute this view, the conclusion that most investors are in the cycle remains a bullish one,” he wrote in a note. “We continue to recommend a more defensive growth position in one’s portfolio, especially as we enter September, as growth fears or financial worries can return anytime late in the cycle.”
Elsewhere, key rate decisions for central banks are due this week in Australia and Malaysia, where rates are expected to remain on hold.
Traders will monitor China’s trade and inflation data later this week, which may show the economy’s recovery is weak, pushing policymakers to roll out more stimulus.
Key events this week:
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Labor Day holiday in the US and Canada, Monday
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ECB President Christine Lagarde speaks at a seminar organized by the European Center for Economics and Finance
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Australian Current Account, Price Decision, Tuesday
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Japanese household spending, Tuesday
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China Caixin services PMI, Tuesday
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Eurozone S&P International Eurozone services PMI, PPI, Tuesday
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US factory orders, Tuesday
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ECB President Christine Lagarde addresses a panel on central banks and international sanctions at the ECB’s legal conference on Tuesday.
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Australian GDP, Wed
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Eurozone retail sales, Wed
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German factory orders, Wednesday
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American Business, Wednesday
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Canadian Rate Decision, Wed
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Bank of England Governor Andrew Bailey testified to the UK Parliament’s Treasury Select Committee on Wednesday.
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The Federal Reserve released its Big Book economic survey on Wednesday, based on reports from the Fed’s 12 district banks.
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Susan Collins, president of the Boston Federation, will speak about the economy at the New England Council in Boston on Wednesday.
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Dallas Federation President Lori Logan at a community listening session to explore economic issues facing the Lubbock area, Wednesday.
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Chinese business, forex stock, Thursday
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Eurozone GDP, Thursday
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US first jobless claims, Thursday
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Bank of Canada Governor Tiff McLeum to speak Thursday about the economic growth report in Calgary
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New York Fed President John Williams participated in a discussion at the Bloomberg Markets Forum on Thursday.
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Atlanta Fed President Rafael Bostick spoke about the economic outlook Thursday at Broward College in Davie, Florida.
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Japan’s GDP, Fri
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French industrial production, Friday
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German CPI, Fri
Some of the major activities in the markets are-
Shares
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The S&P 500 was little changed as of 11:32 a.m. Tokyo time. The S&P 500 rose 0.2 percent on Friday.
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Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.1%
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Japanese stocks rose 0.8 percent
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Australia’s S&P/ASX 200 rose 0.5%.
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Hong Kong’s Hang Seng rose 2.7 percent.
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The Shanghai Composite rose 1.2 percent.
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Euro Stoxx 50 futures rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index was down 0.1%
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The euro was little changed at $1.0786.
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The Japanese yen was little changed at $146.10.
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The offshore yuan rose 0.1% to 7.2609 per dollar.
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The Australian dollar rose 0.3 percent to 0.6473.
Crypto currencies
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Bitcoin fell 0.5% to $25,914.78
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Ether fell 0.6% to $1,633.28
Bonds
Goods
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West Texas Intermediate crude rose 0.2 percent to $85.68 a barrel.
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Spot gold rose 0.3 percent to $1,945.61 an ounce.
This story was produced with the help of Bloomberg Automation.
–With assistance from John Cheng.
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