(Bloomberg) — Asian stocks advanced after stronger-than-expected US payroll data underscored the health of the world’s largest economy and boosted investor optimism.
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Equity benchmarks gained across the region and US 10-year yields rose to hover just shy of the key 4% threshold, as investors trimmed their wagers on big Federal Reserve interest-rate cuts. Asian currencies weakened against the dollar, with Indonesia’s rupiah falling for a sixth day. Bank Indonesia said it stood ready to intervene to support the exchange rate.
Trading is being shaped by signs of US economic resilience, after employers added the most jobs in six months in September. Wagers on a “no landing” scenario — where growth momentum remains intact and inflation reignites — stand to boost the greenback while triggering a drop in haven assets. A gauge of Chinese stocks in Hong Kong jumped to the highest level in more than two years before mainland China markets reopen Tuesday after a week-long holiday.
“In the short term, sentiment could overshoot but people will go back to fundamentals,” said Raymond Ma, Invesco’s chief investment officer for Hong Kong and Mainland China. “Because of this rally, some stocks have become really overvalued” and they lack a clear value proposition based on their likely earnings performance, he said.
Chinese authorities have announced a number of stimulus measures over the past two weeks. Officials from the National Development and Reform Commission said on the weekend will hold a briefing on Tuesday on implementing incremental economic policies.
Goldman Sachs Group Inc. upgraded Chinese stocks to overweight, with strategists including Tim Moe citing a further 15%-to-20% upside potential even after the rally that started in late September. Still, there have been a number of false dawns already and firms such as Invesco Ltd., JPMorgan Asset Management, HSBC Global Private Banking and Wealth, and Nomura Holdings Inc. are among those viewing the rebound with skepticism.
Beijing will need to use its fiscal firepower to arrest the housing-market slump and also stimulate private consumption, which “depends on business confidence and animal spirits in the private sector,” said Qian Wang, chief economist for Asia Pacific at Vanguard Group Inc.
Bond traders are buckling up for a “no landing” scenario.
Investors are “starting to reprice and rethink what’s the Fed’s doing,” said Jessica Zarzycki, a Nuveen Asset Management LLC bond fund manager. “They have enough room as inflation trends towards 2% to take out some of those emergency cuts that we saw.”
Elsewhere in Asia, New Zealand bonds fell less than Treasuries amid speculation the central bank will cut rates by 50 basis points on Wednesday. The yen gained against the dollar, halting a three-day slide.
The Bank of Korea is also due to hold a rate decision this week. Bloomberg Economics expects a 25-basis-point cut on Oct. 11 as inflation slows and tighter regulations start cooling the housing market.
Oil drifted lower as traders weighed Israel’s potential retaliation against Iran for a missile attack last week, with President Joe Biden discouraging a strike on Tehran’s crude fields.
This week, Germany is expected to downgrade its growth outlook while a slew of inflation readings in emerging markets are due. Minutes from the Fed’s September policy meeting will also be released as well as the September CPI print before the start of earnings season.
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 12:39 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 2.3%
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Japan’s Topix rose 1.7%
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Australia’s S&P/ASX 200 rose 0.4%
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Hong Kong’s Hang Seng rose 1.2%
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Euro Stoxx 50 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 $1.0972
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The Japanese yen rose 0.2% to 148.43 per dollar
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The offshore yuan was little changed at 7.0916 per dollar
Cryptocurrencies
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Bitcoin rose 1.3% to $63,435.87
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Ether rose 2.2% to $2,491.47
Bonds
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The yield on 10-year Treasuries was little changed at 3.97%
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Japan’s 10-year yield advanced three basis points to 0.910%
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Australia’s 10-year yield advanced six basis points to 4.07%
Commodities
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West Texas Intermediate crude fell 0.3% to $74.14 a barrel
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Spot gold fell 0.3% to $2,646.52 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Tania Chen.
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