Hong Kong Shares Drop, Japanese Equities Rally: Markets Wrap

(Bloomberg) — Hong Kong shares fell as investors hit pause on the Chinese equity rally, while Japanese stocks advanced after fresh weakness in the yen.

A gauge of Hong Kong-listed Chinese companies dropped as much as 3.8%, halting a 13-day rally that was fueled by optimism over measures to stimulate the economy. Stocks in Australia were flat as were US equity futures after benchmarks closed little changed Wednesday. Equities in Mainland China and South Korean are shut for holidays. Oil gained for a third day amid tensions in the Middle East.

“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.”

Japan’s Topix index advanced more than 1% after new prime minister Shigeru Ishiba said the economy isn’t ready for another interest-rate increase, weakening the currency. 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. 

Oil Rallies

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.

Data Wednesday showed US companies added more jobs than economists forecast last month, at odds with other indicators that show a cooling labor market. Friday’s nonfarm payrolls numbers will be the next critical reading on the health of workers and the US economy. 

The “ADP employment number surprised to the upside, suggesting the labor market is bending but not breaking,” said Chris Larkin at E*Trade from Morgan Stanley. “Friday’s monthly jobs report will have the final word on the current jobs picture, and more than likely, on near-term market sentiment.”

US Jobs

The US nonfarm payroll report won’t take a half a percentage point cut off the table, according to Bank of America Corp. strategists led by Meghan Swiber. “Even if the labor market surprises to the strong side, pricing will still maintain optionality,” they wrote.

To Marc Rowan, the chief executive officer of Apollo Global Management Inc., the Fed’s aggressive policy easing threatens to overstimulate the economy. 

“It is not clear we need more rate cuts,” he said in an interview with Bloomberg Television, pointing to ready financing and rising real estate prices.  

Richmond Fed President Thomas Barkin said it was too early for the central bank to declare victory over rising prices. “While we have made real progress — there remains significant uncertainty on both inflation and employment,” he said. 

Key events this week: 

• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 11:08 a.m. Tokyo time
• Japan’s Topix rose 1.4%
• Australia’s S&P/ASX 200 was little changed
• Hong Kong’s Hang Seng fell 2.9%
• Euro Stoxx 50 futures fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was little changed at $1.1036
• The Japanese yen fell 0.2% to 146.75 per dollar
• The offshore yuan was little changed at 7.0418 per dollar

Cryptocurrencies

• Bitcoin rose 0.3% to $61,077.07
• Ether was little changed at $2,386.95

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.79%
• Japan’s 10-year yield advanced one basis point to 0.830%
• Australia’s 10-year yield advanced five basis points to 4.01%

Commodities

• West Texas Intermediate crude rose 1.1% to $70.89 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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