Asian stocks and emerging market currencies advanced Tuesday and European stock futures pointed to another day of gains as a weak dollar and overnight rally on Wall Street boosted demand for risk assets.
Technology stocks were among the outperformers in the region. A gauge of China developers gained as much as 7.6%, set for its best day since early this month after Bloomberg reported that regulators are drafting a list of 50 developers eligible for a range of financing. US contracts were little changed after the S&P 500 had its strongest close since August and the Nasdaq 100 hit a 22-month high.
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Treasuries held gains in Asian trading after a strong 20-year auction in the previous session. Shortly after the auction results, US 10-year yields reversed course and fell to around 4.4% Monday, pushing the dollar to an 11-week low. Growing wagers on a rapid Fed pivot to rate cuts in 2024 and the dollar weakness supported the region’s stocks and sent a gauge of emerging-market currencies toward its best year since 2017.
The “mini” bear trend in the dollar has a little bit further to run, Richard Franulovich, head of FX strategy at Westpac Banking, told Bloomberg Television.
In China, developers’ bonds gained along with their shares as the so-called white list helped alleviate fears of further contagion in the property sector while Longfor Group Holdings 2032 notes rose 4 cents Monday, on pace for its biggest gain in almost two weeks while another local developer Seazen Group saw its shares up as much as 17% on Tuesday, the largest increase since early September.
“Overall, we are pleased to hear that regulators are more proactive to help the sector,” Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities, wrote in a note. “For developers with a liquidity problem, it is too early to expect them to benefit in the near future.”
The People’s Bank of China is also mulling further measures to shore up credit, encouraging lenders to cap the amount of new loans they issue in early 2024, people familiar with the matter said.
More clues of recovery in the world’s second largest economy may come from Baidu Inc. as well as Kuaishou Technology that are in the pipeline to report results Tuesday. Baidu will probably report a 5.1% increase in revenue, estimates show, while Kuaishou may report little-changed earnings sequentially as improvements in content algorithms and e-commerce sales were offset by weaker live-streaming revenue.
Traders have also been fixated on Treasury sales, especially after the US recently offered an unusually large premium to sell 30-year securities. Those auctions have been exerting a growing sway over stocks, underscoring how the path of interest rates is gripping markets of late.
After a more than three-decade hiatus, the Treasury resurrected 20-year bonds in May 2020. Before Monday’s auction, it had not sold the securities during the Thanksgiving week. They’ve traded at a discount to other long-term maturities — which caused a degree of apprehension ahead of the sale.
“Treasuries offer extremely attractive yields,” according to Principal Asset Management. “And while the potential for capital appreciation might be limited in the face of an impending economic slowdown, the assurance of a steady income from Treasuries makes them a solid option for investors prioritizing stability heading into an uncertain 2024.”
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In the artificial intelligence space, OpenAI’s investors are still trying to return co-founder Sam Altman to a leadership role at the ChatGPT maker. Earlier, Microsoft climbed to fresh peaks after it hired Altman and Greg Brockman to lead its research team. In late US trading, Zoom Video Communications rose on better-than-expected sales, while Nvidia will report quarterly results Tuesday.
The artificial intelligence theme regained momentum in Asia, with Taiwan’s stock benchmark set for its highest close since April 2022. The gauge counts chipmakers Taiwan Semiconductor Manufacturing Co. and MediaTek as its members.
Meanwhile, the S&P 500 is set to rise toward its all-time high early next year, pullback midyear and then rally back toward the highs, according to strategists at Societe Generale SA.
“The S&P 500 should be in ‘buy-the-dip’ territory, as leading indicators for profits continue to improve,” wrote Manish Kabra. “Yet, the journey to the end of the year should be far from smooth” he added, citing an economic downturn, a looming credit selloff, and ongoing quantitative tightening as hurdles traders still need to face.
Elsewhere, oil pared a a two-day advance that was driven by speculation OPEC+ may deepen supply cuts at a meeting this weekend.
Key events this week:
- ECB President Christine Lagarde and German Finance Minister Christian Lindner speak, Tuesday
- US existing home sales, Tuesday
- FOMC issues minutes from the Nov. 1 policy meeting, Tuesday
- Nvidia’s earnings, Tuesday
- Canada’s update to the government’s fiscal and economic outlook, Tuesday
- Eurozone consumer confidence, Wednesday
- US initial jobless claims, University of Michigan consumer sentiment, durable goods, Wednesday
- Bank of Canada Governor Tiff Macklem speaks, Wednesday
- Eurozone S&P Global Manufacturing & Services PMI, Thursday
- Thanksgiving holiday — US markets closed — Thursday
- ECB publishes account of October policy meeting, Thursday
- Germany IFO business climate, Friday
- US S&P Global Manufacturing PMI, Friday
- Black Friday, traditional kick-off for the US holiday shopping season
- ECB’s Christine Lagarde speaks, Friday
Some of the main moves in markets:
- S&P 500 futures were unchanged as of 6:13 a.m. London time
- Nikkei 225 futures (OSE) were little changed
- S&P/ASX 200 futures were little changed
- Japan’s Topix fell 0.2%
- Hong Kong’s Hang Seng rose 0.4%
- The Shanghai Composite rose 0.1%
- Euro Stoxx 50 futures were little changed
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.1% to $1.0955
- The Japanese yen rose 0.4% to 147.76 per dollar
- The offshore yuan rose 0.3% to 7.1430 per dollar
- The Australian dollar rose 0.2% to $0.6569
- Bitcoin fell 0.2% to $37,365.15
- Ether fell 0.5% to $2,015.18
- The yield on 10-year Treasuries declined three basis points to 4.39%
- Australia’s 10-year yield declined six basis points to 4.45%
- Japan’s 10-year yield declined 4.5 basis points to 0.695%
- West Texas Intermediate crude fell 0.7% to $77.25 a barrel
- Spot gold rose 0.7% to $1 991.21 an ounce
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