Asia equities fall following Wall Street’s collapse: Markets wrap

(Bloomberg) — Equity benchmarks fell across Asia on Thursday as Hong Kong stocks led losses in a broader, riskier move in global markets.

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The Hang Seng index fell as much as 3.2%, while benchmarks in Japan and Australia fell more than 1%. A measure representing Chinese companies in Hong Kong was also dropped.

U.S. stock futures fell on Wednesday, adding to the S&P 500’s losses. Contracts for the regional Euro Stoxx 50 also retreated, echoing the somber mood.

Chinese investors do not expect policymakers to unveil aggressive stimulus or major economic reforms at a key meeting expected later this month, according to Goldman Sachs Group Inc. On Wednesday.

“Our base case is a weak stimulus,” Bank of America Corp. strategists, including Winnie Wu, wrote in a note. “We believe the government needs to send clear signals to support the economy and the private sector to rebuild confidence.”

Investors also digested news that Chinese banks had stopped buying bonds issued in the Shanghai Free Trade Zone after increased regulatory scrutiny, in a development that could hurt local government financing vehicles.

Australian and New Zealand 10-year government bond yields 2023 rose to record highs, followed by their US counterparts on Wednesday.

Treasury yields rose two basis points to 3.95%, adding to Wednesday’s gains spurred by the latest Federal Reserve minutes. The two-year rate rose to 4.96%.

The move was prompted by Fed minutes that show a split among policymakers over the central bank’s decision to hold off on a June meeting, with voting members on track to raise rates this month. Traders are also looking ahead to US jobs data in the next two days, which will shed more light on the path for interest rates.

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Sue Trinh, co-head of global macro strategy for Manulife Investment Management, said on Bloomberg Television. Current levels have been around half of previous core inflation, he said, indicating further tightening. “We are somewhat on the defensive in the short term.”

A series of US employment reports due on Thursday and Friday will be important. The JOLTS report on job openings is expected to show a decline in job openings and a separate measure of jobless claims is expected to rise, a sign of a cooling labor market.

Meanwhile, Treasury Secretary Janet Yellen landed in Beijing on Thursday to try to further mend the relationship between the world’s two largest economies.

Elsewhere in China, the central bank extended support for the yuan with a stronger daily reference rate, a day after its flagship newspaper commented that the country has plenty of tools to stabilize the weaker currency. Other efforts to prop up the yuan included a decision among China’s biggest banks to cut rates on the country’s $453 billion of corporate U.S. dollar deposits — the second cut in as many weeks.

In emerging markets, Malaysia’s central bank will deliver interest rate results after Sri Lanka’s cut for a second meeting. Movements in major currencies were relatively muted, apart from the yen strengthening 0.3% against the dollar. Traders may once again keep a close eye on both the yen and the yuan, as the broader downward pressure on these currencies shows no end in sight.

Oil rose to add to Wednesday’s rally. Gold rallied as Bitcoin traded above $30,000.

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Highlights of this week:

  • US Initial Jobless Claims, Trade, ISM Services, Jobs, Thursday

  • Dallas Fed President Lori Logan speaks on a panel about policy challenges for central banks at the CEBRA meeting on Thursday.

  • US unemployment rate, non-farm payrolls, Friday

  • The ECB’s Christine Lagarde addresses an event in France on Friday

Some key moves in today’s markets:

Shares

  • S&P 500 futures were down 0.4% as of 2:53pm Tokyo time. The S&P 500 fell 0.2%

  • Nasdaq 100 futures fell 0.5%. The Nasdaq 100 fell 0.03%

  • Japan’s Topix fell 1.2%

  • Australia’s S&P/ASX 200 fell 1.3%

  • Hong Kong’s Hang Seng fell 3.1%

  • The Shanghai composite fell 0.6%

  • Euro Stoxx 50 futures fell 0.6%

Coins

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0844

  • The Japanese yen rose 0.6% to 143.75 per dollar

  • The offshore yuan was little changed at 7.2607 per dollar

Cryptocurrencies

  • Bitcoin rose 0.3% to $30,572.56

  • Ether rose 0.5% to $1,919.71

Bonds

  • The yield on 10-year Treasuries rose two basis points to 3.95%

  • Japan’s 10-year yield rose two basis points to 0.400%

  • Australia’s 10-year yield rose 12 basis points to 4.12%

materials

  • West Texas Intermediate crude was down 0.3% at $71.57 a barrel.

  • Spot gold rose 0.2% to $1,919.87 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Isabelle Lee and Emily Grafio.

(An earlier version of this story has been edited to remove reference to Hong Kong-listed banks in the headline, first and second paragraphs)

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