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

(Bloomberg) -- Chinese shares in Hong Kong fell as investors hit pause on their world-beating rally over the past month. Japanese stocks gained on a weaker yen while oil rose for a third day amid tensions in the Middle East.

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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 world’s second-biggest 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. US and European stock futures fell.

There’s some “profit-taking as the stimulus momentum has stalled with China away on holiday,” said Charu Chanana, global markets strategist at Saxo Markets. “Markets still remain uncertain about the impact of the announcements to address China’s structural headwinds.”

Japanese shares rallied, with the Topix index rising more than 1% after new prime minister Shigeru Ishiba said on Wednesday the economy isn’t ready for another interest-rate increase, sending the yen lower. Japan’s currency slipped 0.2% Thursday to 146.78 per dollar after tumbling 2% the day before.

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.

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 gained 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.

“Following the initial jitters from geopolitical risks in the Middle East, Asian markets have managed to regain some composure in today’s session,” said Jun Rong Yeap,a market strategist at IG Asia Pte. “The question has been about how aggressive Israel’s response will be and whether energy infrastructure will be impacted, but expectations are that more clarity may still take some time,” he said.

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 2:06 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 2.6%
Euro Stoxx 50 futures fell 0.6%

Currencies

The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.1% to $1.1031
The Japanese yen fell 0.2% to 146.73 per dollar
The offshore yuan fell 0.2% to 7.0478 per dollar

Cryptocurrencies

Bitcoin rose 0.6% to $61,244.35
Ether rose 0.3% to $2,393.24

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 4.02%

Commodities

West Texas Intermediate crude rose 1.3% to $71.03 a barrel
Spot gold fell 0.1% to $2,655.84 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Winnie Hsu and John Cheng.

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