(Bloomberg) — Asian shares rose after stronger-than-expected U.S. payroll data underscored the health of the world’s largest economy and boosted investor optimism.
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Equity benchmarks rose across the region and the US 10-year yield rose to just below the key 4% threshold as investors scaled back bets on big rate cuts by the Federal Reserve. Asian currencies weakened against the dollar, with the Indonesian rupiah falling for a sixth day. Bank Indonesia said it was ready to intervene to support the exchange rate.
Trading is driven by signs of economic resilience in the US after employers added the most jobs in six months in September. Betting on a no-landing scenario – in which growth momentum remains intact and inflation reignites – could boost the dollar while triggering a decline in port assets. A gauge of Chinese shares in Hong Kong rose to the highest level in more than two years before markets in mainland China reopened on Tuesday after a week-long holiday.
“Sentiment could overshoot in the short term, but people will return to fundamentals,” said Raymond Ma, Invesco’s chief investment officer for Hong Kong and mainland China. “This rally has left some stocks really overvalued” and missing a clear value proposition based on their likely earnings performance, he said.
Chinese authorities have announced a number of stimulus measures in the past two weeks. National Development and Reform Commission officials said they will hold a briefing this weekend on Tuesday on the implementation of incremental economic policies.
Goldman Sachs Group Inc. upgraded Chinese stocks to overweight, with strategists including Tim Moe citing further upside potential of 15% to 20% even after the rally that started in late September. Yet there have already been a number of false mornings and companies such as Invesco Ltd., JPMorgan Asset Management, HSBC Global Private Banking and Wealth and Nomura Holdings Inc. are among those who view the recovery with skepticism.
Beijing will need to use its fiscal firepower to stem the housing market slump and also boost 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 bracing for a ‘no landing’ scenario.
Investors “are starting to reprice and reconsider what the Fed is doing,” said Jessica Zarzycki, bond fund manager at Nuveen Asset Management LLC. “They have plenty of room as inflation heads towards 2% to undo some of the emergency cuts we’ve seen.”
Elsewhere in Asia, New Zealand bonds fell less than government bonds amid speculation the central bank will cut interest rates by 50 basis points on Wednesday. The yen gained against the dollar, ending a three-day decline.
The Bank of Korea will also make an interest rate decision this week. Bloomberg Economics expects a 25 basis point cut on October 11 as inflation slows and tighter regulations begin to cool the housing market.
Oil prices fell as traders last week weighed Israel’s possible retaliation against Iran for a missile attack, with President Joe Biden discouraging an attack on Tehran’s crude fields.
This week, Germany is expected to downgrade its growth outlook amid a slew of inflation data in emerging markets. Minutes of the Fed’s September policy meeting will also be released, as will the September CPI print before the start of earnings season.
Some of the major moves in the markets:
Stocks
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Futures on the S&P 500 were little changed at 12:39 a.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 government bonds was little changed at 3.97%
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The Japanese ten-year yield rose by three basis points to 0.910%
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Australian ten-year yields rose six basis points to 4.07%
Raw materials
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West Texas Intermediate crude fell 0.3% to $74.14 a barrel
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Gold fell 0.3% to $2,646.52 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Matthew Burgess and Tania Chen.
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