Chinese Stocks Snap 13-Day Rally, Yen Weakens: Markets Wrap

(Bloomberg) — Chinese shares in Hong Kong fell as investors hit pause on the past month’s world-beating rally. Japanese stocks advanced after fresh weakness in the yen.

A gauge of Hong Kong-listed Chinese companies dropped as much as 4.9%, halting a 13-day rally that was fueled by optimism over measures to stimulate the economy. The Hang Seng Index sank as much as 4.5%, its biggest intraday drop in almost two years. Markets in mainland China remain shut for Golden Week. Oil gained for a third day amid tensions in the Middle East, while US stock futures fell.

“It appears that the speculative surge has finally hit a speed bump, driven by cautious profit takers,” said Hebe Chen, an analyst at IG Markets Ltd. in Melbourne.

Japanese shares rallied, with the Topix index rising more than 1% after new prime minister Shigeru Ishiba said the economy isn’t ready for another interest-rate increase. The yen fell to a more than one-month low against the dollar, extending its 2% decline Wednesday.

Renewed vigor in the dollar added to the pressure on the yen as stronger-than-expected ADP jobs data led traders to pare bets on aggressive Federal Reserve rate cuts. Swaps traders were penciling in some 33 basis points of policy easing at the central bank’s November meeting, down from 44 basis points just last week. 

Last week, China’s central bank announced stimulus measures in a bid to reach this year’s economic growth target. China’s CSI 300 Index officially entered a bull market on Monday, before closing for a week-long public holiday. 

“Clients are still questioning the effectiveness of Beijing’s stimulus measures,” said Sonija Li, an analyst at MIB Securities Hong Kong Ltd. “After the recent rally, now people are asking how much upside there remains. Surprisingly, there’s not much interest in the China property sector.”

Global equities are on course for their first weekly loss in four weeks amid the lingering threat of an escalation of geopolitical tensions in the Middle East as well as speculation over the pace of the Fed’s monetary policy easing. Investors focus will be on Friday’s nonfarm payroll data to further gauge the size of the next Fed cut.

Oil rose as investors awaited Israel’s response to Iran’s missile attack, with US President Joe Biden urging Israel to hold off from attacking Iran’s nuclear facilities.

Bloomberg’s dollar index rose for a fourth day, bolstered by rising Treasury yields. The US 10-year yield rose one basis point to 3.79% in Asian trade after jumping five basis points in New York amid the flare-up in Middle-East tensions.

Key events this week: 

• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 12:56 p.m. Tokyo time
• Nikkei 225 futures (OSE) rose 2.3%
• Japan’s Topix rose 1.2%
• Australia’s S&P/ASX 200 was little changed
• Hong Kong’s Hang Seng fell 3.1%
• Euro Stoxx 50 futures fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was little changed at $1.1036
• The Japanese yen fell 0.3% to 146.85 per dollar
• The offshore yuan fell 0.1% to 7.0469 per dollar

Cryptocurrencies

• Bitcoin rose 0.7% to $61,361.57
• Ether rose 0.4% to $2,396.27

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.79%
• Japan’s 10-year yield was little changed at 0.815%
• Australia’s 10-year yield advanced six basis points to 4.01%

Commodities

• West Texas Intermediate crude rose 1.4% to $71.07 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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