(Bloomberg) — A rally in Asian equities took a breather as investors sought new catalysts following a holiday in the US. The offshore yuan weakened to the lowest this year.
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The MSCI Asia Pacific Index slipped 0.4% after jumping 1% on Wednesday, with shares in Japan falling the most. Hong Kong shares fluctuated after Wednesday’s gains that were driven by a report that the city is looking to allow mainland investors use the yuan to buy some of the financial hub’s listed stocks
The People’s Bank of China weakened the yuan’s daily reference rate to the lowest since November in a sign policymakers are loosening their grip on the currency. The move came as Chinese banks kept their lending benchmark rates unchanged.
“A soft start in Tokyo suggests markets may be better for caution rather than cavalier optimism,” said Vishnu Varathan, Singapore based chief Asia ex-Japan economist at Mizuho Bank Ltd. “Roll-over momentum from yuan demand for HK equities could still prop up the Hang Seng.”
US Treasury and Australian bond yields edged higher, following a rise in their European peers. A Bloomberg index of dollar strength was little changed.
Chinese bonds remained in focus after PBOC Governor Pan Gongsheng gave the clearest indication yet that the central bank would start trading government bonds on the secondary market. Ten-year government bond futures closed at a record on Wednesday.
The New Zealand dollar and government bond yields advanced after the nation’s economy exited a recession with modest expansion in the first quarter. Gross domestic product gained 0.2% from the previous quarter, beating economist estimates of 0.1% growth.
“Although the data can be volatile, markets are reading it as lessening the odds of early rate cuts,” said David Croy, a strategist at Australia & New Zealand Banking Group in Wellington.
Despite Thursday’s tepid moves, a gauge of Asian stocks is trading near its highest in two years. Wall Street, meanwhile, has been lifted by the continued AI frenzy and resilient economic growth that should continue to support corporate earnings, especially in the technology sector.
Questions are rising on what could derail the stock rally given “all is not so rosy under the hood, where index market breadth has been poor, with participation underwhelming, suggesting the rally has been built on a shaky foundation,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “It has simply been a tough trade to bet against AI in its various guises – so until we lose these behemoths then pullbacks at an index level will likely be shallow and well-supported.”
In commodities, oil steadied ahead of the release of weekly inventory data from the US that may show another rise in nationwide crude inventories. Gold edged higher after closing the previous session little changed.
Key events this week:
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China loan prime rates, Thursday
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Eurozone consumer confidence, Thursday
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UK BOE rate decision, Thursday
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US housing starts, initial jobless claims, Thursday
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Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday
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US existing home sales, Conf. Board leading index, Friday
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Fed’s Thomas Barkin speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.1% as of 10:42 a.m. Tokyo time
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Japan’s Topix fell 0.8%
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Australia’s S&P/ASX 200 was little changed
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Hong Kong’s Hang Seng rose 0.2%
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The Shanghai Composite rose 0.2%
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Euro Stoxx 50 futures were little changed
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Nasdaq 100 futures rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0747
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The Japanese yen was little changed at 158.04 per dollar
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The offshore yuan was little changed at 7.2832 per dollar
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The Australian dollar was little changed at $0.6676
Cryptocurrencies
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Bitcoin rose 0.5% to $65,165.82
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Ether rose 0.3% to $3,563.97
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.24%
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Japan’s 10-year yield was unchanged at 0.925%
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Australia’s 10-year yield advanced three basis points to 4.21%
Commodities
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West Texas Intermediate crude fell 0.2% to $81.42 a barrel
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Spot gold rose 0.4% to $2,338.62 an ounce
This story was produced with the assistance of Bloomberg Automation.
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