(Bloomberg) -- Asian stocks and US futures climbed Tuesday as investors weighed China’s economic outlook and the Federal Reserve’s interest-rate path.
Shares rose in Hong Kong and mainland China as a poor reading for retail sales underscored how much the economy has to benefit from the government’s recent efforts to recalibrate Covid curbs. A gauge of Asian equities headed for the highest in two months and contracts for the S&P 500 and the Nasdaq 100 were up.
The dollar and Treasury yields held their gains, with the 10-year rate around 3.86% after Federal Reserve speakers highlighted resolve to be persistent until inflation heads back down to levels consistent with the 2% target. Fed Vice Chair Lael Brainard briefly buoyed sentiment after she said it would be appropriate “soon” to slow the pace of interest-rate hikes.
“It’s certainly a time to be thinking about a recovery regime unfolding for markets,” Kristina Hooper, chief global market strategist at Invesco, said on Bloomberg Radio. “But it’s going to take a little time before we know if this really is something of a turning point for inflation and the Fed can be a lot more comfortable about hastening the end of tightening.”
While China’s economy slowed in October and industrial output missed estimate, sentiment has been supported by some eased virus measures and help for the property market. The People’s Bank of China kept the medium-term lending facility rate unchanged, injecting less money than expected in a possible sign of optimism.
Chinese stocks listed in the US has extended their rally to a third day after Joe Biden and Xi Jinping called for reduced tensions between the world’s two biggest economies during a meeting in Bali, Indonesia.
The Hang Seng China Enterprises Index has now risen more than 20% from a low on Oct. 31, meeting the common definition of a technical bull market. The easing of some virus controls and sweeping measures to support the property market have given traders confidence that Beijing is finally taking concrete steps to tackle the two biggest sore points for the economy and markets.
Despite these positive signs in Asia and indications of moderating inflation in the US, higher borrowing costs are a headwind for the global economy.
The cumulative impact of prior interest-rate hikes will continue to weigh on growth and corporate profits, according to Mark Haefele, chief investment officer at UBS Global Wealth Management, who recommends that investors take a defensive position.
In Japan, the economy shrank in the three months through September, as consumers spent less amid a resurgence of Covid cases and the weak yen battered trade. The yen traded around 140 versus the dollar on Tuesday, having strengthened from the 150 level seen in October.
Elsewhere, oil extended losses as concerns over the near-term demand outlook overshadowed signs of tightening supply heading into winter. Gold was steady.
Key events this week:
- Former US President Donald Trump plans to make an announcement, Tuesday
- US empire manufacturing, PPI, Tuesday
- US business inventories, cross-border investment, retail sales, industrial production, Wednesday
- Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
- ECB President Christine Lagarde speaks, Wednesday
- Eurozone CPI, Thursday
- US housing starts, initial jobless claims, Thursday
- Fed’s Neel Kashkari, Loretta Mester speak, Thursday
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.4% as of 11:30 a.m. in Tokyo. The S&P 500 fell 0.9%
- Nasdaq 100 futures rose 0.5%. The Nasdaq 100 fell 1%
- Japan’s Topix index rose 0.3%
- Hong Kong’s Hang Seng Index rose 3%
- China’s Shanghai Composite Index rose 084%
- Australia’s S&P/ASX 200 Index fell 0.4%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0325
- The Japanese yen fell 0.3% to 140.25 per dollar
- The offshore yuan was little changed at 7.0478 per dollar
- Bitcoin rose 2.1% to $16,734.06
- Ether rose 2.7% to $1,259.58
- The yield on 10-year Treasuries advanced two basis points to 3.87%
- Japan’s 10-year yield was little changed at 0.25%
- Australia’s 10-year yield was little changed at 3.77%
- West Texas Intermediate crude fell 0.6% to $85.37 a barrel
- Spot gold was little changed