(Bloomberg) — Japanese stocks fell early Monday after elections for the ruling party raised expectations of further interest rate hikes by the central bank. Iron ore production rose after several major Chinese cities eased restrictions on home buying.
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The Nikkei and Topix indexes both fell on the open following Shigeru Ishiba’s victory in the Liberal Democratic Party’s leadership contest. Ishiba has said he supports the Bank of Japan’s independence and normalization path in principle, and that the country must beat deflation.
Australian shares also fell, while Hong Kong futures were flat. US contracts rose marginally. Iron ore futures rose 8% in Singapore after the cities of Shanghai, Guangzhou and Shenzhen relaxed rules on home purchases, following the central government’s latest efforts to prop up the embattled property sector.
Markets enter the final quarter as the global economic outlook improves following China’s stimulus measures and as central banks in Indonesia, Europe and the US begin to cut interest rates to support growth. According to the latest Bloomberg Markets Live Pulse survey, US stocks will outperform Treasuries for the rest of the year, while emerging markets are favored over developed markets.
Traders are preparing for big swings in Chinese stocks on Monday as data on economic activity is released in the final trading session before markets close for Golden Week, after the benchmark CSI 300 posted its best week since 2008. The Shanghai Stock Exchange conducted weekend stress tests of brokers after its systems struggled to cope with a surge in trading activity on Friday.
The renewed demand comes as authorities stepped up efforts to revive growth with promises to support budget spending and stabilize the real estate sector. Stephen Jen, CEO of Eurizon SLJ Capital, said a “serious rally” in stocks, yuan and government bonds is very possible as investors underweight the country’s assets.
Still, global sentiment could be dampened on Monday as tensions escalate in the Middle East. Oil rose in early trading on Monday as traders await the response to Israel’s killing of Hezbollah chief Hassan Nasrallah on Friday in an airstrike on the group’s headquarters in the Lebanese capital Beirut.
The attack came after the US, France and Arab countries tried in recent days to de-escalate the situation and prevent an Israeli ground offensive on southern Lebanon that they fear could trigger a war across the region.
The Iranian embassy in Beirut said Israel’s attacks represent a dangerous escalation and will result in appropriate punishment. However, President Masoud Pezeshkian has failed to launch a direct and immediate attack on Israel in retaliation.
“For the markets, it comes down to what Iran decides to do,” Minna Kuusisto of Danske Bank wrote in a note to clients. “An outright war in Lebanon would bring another war to Europe’s doorstep, but markets will ignore human suffering as long as the oil trade remains intact.”
This week, traders will pay close attention to China’s and Caixin’s official PMIs for manufacturing and services on Monday before markets close for Golden Week. Data on inflation and industrial activity in the eurozone is expected ahead of Friday’s U.S. jobs report, which will help assess the prospects for Federal Reserve rate cuts by the end of the year.
Some of the major moves in the markets:
Stocks
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S&P 500 futures rose 0.1% as of 9:05 a.m. Tokyo time
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Hang Seng futures were little changed
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Japan’s Topix fell 2.7%
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Australia’s S&P/ASX 200 rose 0.6%
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Euro Stoxx 50 futures rose 0.8%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.1169
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The Japanese yen fell 0.3% to 142.64 per dollar
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The offshore yuan was little changed at 6.9765 per dollar
Cryptocurrencies
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Bitcoin fell 0.5% to $65,485.82
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Ether fell 0.2% to $2,655.15
Bonds
Raw materials
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West Texas Intermediate crude rose 0.1% to $68.26 a barrel
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Spot gold rose 0.3% to $2,665.23 an ounce
This story was produced with the help of Bloomberg Automation.
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