(Bloomberg) — Asian stocks advanced on Monday led by a rally in Hong Kong technology shares, while hopes of lower US interest rates pushed the region’s currencies to the highest level in five months against the greenback.
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A gauge for Asian shares rose, following its best week in over a year. Equity markets in China rose as an index for Hong Kong tech climbed over 2.5%, propelled by JD.com Inc., whose shares surged the most since June after reporting unexpectedly strong results.
Contracts for European and US equities also rose. Meanwhile, the Bloomberg Asia Dollar Index gained as much as 0.6%, while the yen soared 1%.
Monday’s activity suggests ebbing concerns of a US recession and the prospect of lower borrowing costs are lifting sentiment across the region. The major signpost for the week will be on Friday, when Federal Reserve Chairman Jerome Powell is expected to give fresh insights on the course of US monetary policy at the central bank’s annual confab in Jackson Hole.
“As the recent trading activities are short-term oriented, investors are buying to discount the US rate cut because valuation in Hong Kong looks attractive,” said Steven Leung, executive director at UOB Kay Hian Hong Kong. “Once the cut is confirmed, investors will take short term profits and sell on the good news.”
Goldman Sachs at the weekend trimmed the probability of a US recession in the next year to 20% from 25%, citing last week’s retail sales and jobless claims data. If the August jobs report set for release on Sept. 6 “looks reasonably good, we would probably cut our recession probability back to 15%,” Goldman economists led by Jan Hatzius wrote in a report to clients on Saturday.
In Asia, investors will be looking this week to central bank meetings in Indonesia and South Korea for signs of policy easing, while the Thailand decision will be crucial following reports the nation’s new prime minister may abandon a key stimulus package.
Stronger Asian currencies which have benefited from improved risk sentiment should bring faster policy rate cuts by many Asian central banks, Tomo Kinoshita, global market strategist at Invesco Asset Management Japan, said on Friday.
“The market is envisaging a brighter picture for Asian economies in the coming quarters,” he added. “This should encourage investors to allocate more funds to Asian equities, especially Indian, Indonesian and Malaysian equities.”
Bank of Japan Governor Kazuo Ueda is scheduled to attend a special session at parliament this week to discuss the July 31 interest rate hike, which roiled global markets. Hedge funds have turned bullish on the nation’s currency for the first time since 2021, which marks a sharp turnaround from the extremely negative sentiment seen among these traders as recently as early July.
Large investors, such as Vanguard, are still betting on more interest rate hikes in Japan in the coming months, even after a sharp decline in market pricing for more tightening this year. The yen rose for a second session on Monday to trade at around 146 per dollar, as the nation’s equities fell for the first time in six days.
In China, authorities are expected to keep the 1- and 5-year loan prime rates steady on Tuesday after the People’s Bank of China last week pledged further steps to support economic recovery, while cautioning that it won’t be adopting “drastic” measures.
Markets will also be monitoring Chinese automakers including Xpeng Inc., Geely Automobile Holdings Ltd. and Xiaomi Corp., who all should report higher vehicle sales. Challenges remain high though, as competition heats up and the European Union moves ahead with tariffs.
Oil declined for the fourth time in five sessions as traders tracked US-led efforts to secure a cease-fire in the 10-month old Middle East, while the Russia-Ukraine war is escalating. Gold wavered near an all-time high on hopes the Fed is edging closer to cutting rates. Elsewhere, iron-ore had its worst week since early June on concern that a steel-industry crisis rippling across China will sap demand, while supplies from miners remain robust.
Here’s what’s coming up:
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US Democratic National Convention takes place Aug. 22, Monday
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Start of annual US-South Korea joint military exercise, Monday
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China loan prime rates, Canada and euro area CPI, Tuesday
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Sweden and Turkey interest rate decisions, Tuesday
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Indonesia and Thailand interest rate decisions, Wednesday
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US FOMC minutes of of July 30-31 policy meeting, BLS preliminary annual payrolls revision, Wednesday
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European Central Bank Governing Council member Fabio Panetta speaks in Rimini, Wednesday
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South Korea central bank rate decision, Thursday
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US Vice President Kamala Harris delivers acceptance speech on the final night of Democratic National Convention, Thursday
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Mexico’s central bank, National Bank of Poland issues monetary policy minutes
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Malaysia CPI data, while Mexico and Norway publish GDP data
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Japan CPI data due, and Bank of Japan Governor Kazuo Ueda to attend special session at Japan’s parliament to discuss July 31 rate hike, Friday
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Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey speak at Kansas City Fed’s annual Jackson Hole symposium, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 1:38 p.m. Tokyo time
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Nikkei 225 futures (OSE) fell 1.5%
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Japan’s Topix fell 1%
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Australia’s S&P/ASX 200 was little changed
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Hong Kong’s Hang Seng rose 1.1%
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The Shanghai Composite rose 0.5%
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Euro Stoxx 50 futures rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index fell 0.3%
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The euro rose 0.1% to $1.1040
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The Japanese yen rose 1.1% to 146.05 per dollar
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The offshore yuan rose 0.3% to 7.1417 per dollar
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The Australian dollar rose 0.3% to $0.6690
Cryptocurrencies
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Bitcoin fell 2% to $58,635.05
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Ether fell 1.1% to $2,638.08
Bonds
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The yield on 10-year Treasuries was little changed at 3.88%
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Japan’s 10-year yield advanced three basis points to 0.900%
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Australia’s 10-year yield was little changed at 3.93%
Commodities
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West Texas Intermediate crude fell 0.3% to $76.43 a barrel
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Spot gold fell 0.2% to $2,502.33 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
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