(Bloomberg) — Stocks in Asia treaded water while major currencies including the offshore yuan and Australian dollar fell as investors parsed signs of improving ties between Washington and Beijing and hopes for further stimulus in China to boost its flagging recovery.
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Equities were flat in Japan, fell in China and South Korea and drifted higher in Australia. US equity futures were flat after an initially rising in early Asian trading.
Currency markets were more volatile. The offshore yuan fell , while the Australian dollar reversed an early gain to fall alongside the New Zealand dollar. The yen traded flat after reversing an early decline that at one point touched levels not seen since November last year. An index of the dollar rose slightly.
The moves reflect uncertainty about China’s economy and the scope of any potential stimulus to spur its sputtering recovery.
Reports from China’s State Council meeting chaired by Premier Li Qiang stated China must adopt “more forceful” measures and respond in a timely manner to support the economic recovery.
The country is set to cut its one and five year loan prime rates in decisions expected Tuesday, according to economist forecasts, after the country reduced a key lending rate last week.
Nomura Holdings Inc., Standard Chartered Plc and Morgan Stanley have said authorities may increase the quota for local government special-purpose bonds to finance infrastructure investments in a potential stimulus package to boost growth.
“Market expectation of policy stimulus is building,” said Kinger Lau, chief equity strategist, China, for Goldman Sachs. He sees further official support for the economy among a series of drivers that could spur Chinese equities higher. “A number of these supportive catalysts are falling into place, engendering an attractive tactical market setup for stock operators to take risk,” he said in a Monday note.
The visit by US Secretary of State Antony Blinken to Beijing in which he held “candid” talks with his Chinese counterpart also heightened the focus on China on Monday.
Shares in chipmakers Samsung and SK Hynix fell after a decline for US-traded Micron Technologies on Friday after it warned that about half of its sales tied to China-headquartered clients may be affected by a Chinese cybersecurity probe.
Australian bond yields fell more than one basis point while those in New Zealand rose by the same amount after Treasury yields climbed Friday.
US stock and bond markets will be closed for the Juneteenth holiday Monday. The S&P 500 declined 0.4% Friday to end a six-session streak of advances as investors look for more insight on Federal Reserve interest rate decisions.
Fed Chair Jerome Powell will give his semi-annual report to Congress on Wednesday. Federal Reserve Bank of St. Louis President James Bullard and his counterparts in New York and Chicago are all set to speak in the week ahead.
The Fed kept interest rates unchanged last week but warned of more tightening ahead. In the past, pausing rate hikes for three months after such a run of interest rate hikes has boosted stock prices.
“We might just have a chance of avoiding recession,” said Loreen Gilbert, chief executive officer for Wealthwise Financial said in an interview with Bloomberg Television. “The markets are already expecting another rate hike and our baseline is that might not even happen.”
Other key central bank developments in the week ahead include policy meetings in Turkey, the UK and Switzerland.
Key events this week:
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US Juneteenth holiday, Monday
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China loan prime rates, Tuesday
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US housing starts, Tuesday
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Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday
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New York Fed President John Williams speaks, Tuesday
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Federal Reserve Chair Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday
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Federal Reserve Bank of Chicago President Austan Goolsbee speaks, Wednesday
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Eurozone consumer confidence, Thursday
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Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
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US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
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Federal Reserve Chair Jerome Powell delivers semi-annual testimony to Congress before the Senate Banking Committee, Thursday
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Cleveland Fed’s Loretta Mester speaks, Thursday
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Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
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Japan CPI, Friday
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UK S&P Global / CIPS UK Manufacturing PMI, Friday
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US S&P Global Manufacturing PMI, Friday
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Federal Reserve Bank of St. Louis President James Bullard speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were down 0.2% as of 10:50 a.m. Tokyo time. The S&P 500 fell 0.4% Friday
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Nasdaq 100 futures were flat. The Nasdaq 100 fell 0.7% Friday
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Japan’s Topix was little changed
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Australia’s S&P/ASX 200 rose 0.4%
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Hong Kong’s Hang Seng fell 0.7%
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The Shanghai Composite fell 0.4%
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Euro Stoxx 50 futures fell 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was unchanged at $1.0937
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The Japanese yen was little changed at 141.88 per dollar
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The offshore yuan fell 0.3% to 7.1498 per dollar
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The Australian dollar fell 0.4% to $0.6849
Cryptocurrencies
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Bitcoin fell 0.2% to $26,415.39
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Ether fell 0.3% to $1,725.29
Bonds
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The yield on 10-year Treasuries was little changed at 3.76%
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Japan’s 10-year yield was unchanged at 0.395%
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Australia’s 10-year yield declined two basis points to 4.00%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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