(Bloomberg) -- European equity futures climbed and Asian stocks fluctuated after another record high on Wall Street. Oil dropped as concerns eased about Israel attacking Iranian energy facilities.
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Technology shares outperformed in Asia, following their US counterparts higher, while oil and energy stocks dropped after the Washington Post reported that Israel doesn’t plan on striking Iranian oil or nuclear facilities. Treasury yields ticked lower on Tuesday as the dollar gained against most of its Group-of-10 peers.
MSCI’s Asia Pacific Index rose as much as 0.7% on the back of the chip sector, with the likes of Taiwan Semiconductor Manufacturing Co. leading the advance, then erased those gains. Japan’s Nikkei 225 Stock Average Index reached its highest levels since July. Benchmarks in Australia and Taiwan also advanced.
“APAC-region investors are likely to take a more risk-on approach as we head into the end of the year, bolstered by an improving macro background in the region,” said David Chao, a global market strategist at Invesco Asset Management. “As long as oil holds steady and the Fed continues to cut rates, I think Asian currencies and risk assets are likely to outperform.”
With earnings reports poised to drive US sentiment this week, the S&P 500 gained almost 1% on Monday, notching another record — its 46th this year. That’s a hint investors are not deterred by the reduced forecasts for third-quarter results and are instead betting on positive surprises.
The Nasdaq 100 added 0.8%. Nvidia Corp. led gains in megacaps, Apple Inc. gained on a bullish analyst call and Tesla Inc. rebounded after last week’s plunge. Goldman Sachs Group Inc. and Citigroup Inc. advanced ahead of results.
However, shares in China and Hong Kong slid, with investors on the watch for further stimulus from the Chinese government. Equity benchmarks in the country had risen on Monday even after a highly anticipated Finance Ministry weekend briefing lacked specific new incentives to boost consumption in the world’s biggest crude importer.
China may raise 6 trillion yuan ($846 billion) from ultra-long special government bonds over three years as part of its efforts to boost the sputtering economy, Chinese media outlet Caixin reported.
“This is the not the ‘bazooka’ some have been calling for, if defined as a major expansion in fiscal stimulus,” said Michael Hirson and Houze Song of 22V Research, in a note. “At face value, it basically continues China’s current incremental approach.”
Chinese banks are set to trim rates on 300 trillion yuan ($42.3 trillion) of deposits as soon as this week after the latest barrage of stimulus policies further squeeze their profitability, according to people familiar with the matter.
Still, there are more signs of economic weakness as a report Monday showed export growth in September unexpectedly climbed just 2.4% in dollar terms from a year earlier to the lowest level since May. That said, the country’s exports of both cars and ships hit records in September even as broader shipments slowed, underscoring the rapid changes in the nation’s industry that are fueling global trade tensions.
“The fundamentals need to see this tailwind from policy to kick the economy going again,” said Steve Brice, Standard Chartered Wealth Solutions Group CIO, on Bloomberg Television.
Meanwhile, in a show of hot demand for Japan’s biggest listing in six years, Tokyo Metro Co.’s initial public offering has raised ¥348.6 billion ($2.3 billion) after the company priced shares at the top of the marketed range, people familiar with the matter said.
Markets are also anticipating Hong Kong leader John Lee’s annual speech on Wednesday, when he is expected to make bolstering the economy a priority and lay out an agenda that includes a potential cut to a liquor tax and possible measures to strengthen the city’s status as a finance center.
Japanese stocks were among the biggest gainers Tuesday. The yen was the best performer among G-10 currencies and remained not far from 150 versus the dollar, a key psychological level with a risk of intervention in focus for investors.
“Considering the situation in the US and China, there are no selling factors in the macro environment, and Japanese stocks are undervalued,” said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management Co.
In the US, earnings season unofficially kicked off on Friday, led by financial bellwethers JPMorgan Chase & Co. and Wells Fargo & Co. On top of other big banks reporting this week, traders will be paying close attention to results from key companies like Netflix Inc. and JB Hunt Transport Services Inc.
An initial round of third-quarter financial results last week showed Corporate America is benefitting from lower rates early into the Federal Reserve’s easing cycle, according to Bank of America Corp. strategists including Ohsung Kwon and Savita Subramanian.
In other news, Biden administration officials have discussed capping sales of advanced AI chips from Nvidia Corp. and other American companies on a country-specific basis, people familiar with the matter said, a move that would limit some nations’ artificial intelligence capabilities.
Key events this week:
Eurozone industrial production, Tuesday
Goldman Sachs, Bank of America, Citigroup earnings, Tuesday
Fed’s Mary Daly, Adriana Kugler speak, Tuesday
Morgan Stanley earnings, Wednesday
ECB rate decision, Thursday
US retail sales, jobless claims, industrial production, Thursday
Fed’s Austan Goolsbee speaks, Thursday
China GDP, Friday
Fed’s Christopher Waller, Neel Kashkari speak, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 6:51 a.m. London time
Nasdaq 100 futures were little changed
The MSCI Asia Pacific Index rose 0.1%
The MSCI Emerging Markets Index fell 0.4%
Japan’s Topix rose 1%
Hong Kong’s Hang Seng fell 2.3%
The Shanghai Composite fell 1.2%
Euro Stoxx 50 futures rose 0.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.2% to $1.0890
The Japanese yen rose 0.2% to 149.51 per dollar
The offshore yuan fell 0.5% to 7.1292 per dollar
The British pound fell 0.1% to $1.3045
Cryptocurrencies
Bitcoin fell 0.9% to $65,309.59
Ether fell 1% to $2,593.82
Bonds
The yield on 10-year Treasuries declined one basis point to 4.09%
Germany’s 10-year yield advanced one basis point to 2.27%
Britain’s 10-year yield advanced three basis points to 4.24%
Japan’s 10-year yield advanced two basis points to 0.965%
Australia’s 10-year yield declined two basis points to 4.25%
Commodities
Spot gold fell 0.2% to $2,642.23 an ounce
West Texas Intermediate crude fell 3.6% to $71.14 a barrel
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Shery Ahn, Jason Scott and Yasutaka Tamura.
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