Stocks Rally as China Factory Data Lift Sentiment: Markets Wrap

(Bloomberg) — Stocks and currencies rallied in Asia, led by a surge of more than 3% in Hong Kong’s benchmark index, as China’s manufacturing posted its biggest improvement in more than a decade.

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An Asian equity benchmark advanced by the most since mid January, while futures for the S&P 500, the Nasdaq 100 and Euro Stoxx 50 all pared losses following a report showing the world’s second-biggest economy is rebounding strongly after Covid restrictions were lifted.

Commodity currencies rose, with the Australian dollar rebounding from a loss, while the offshore yuan strengthened by more than 0.6%. Oil also climbed along with gold.

China’s manufacturing purchasing managers’ index climbed last month to its highest reading since April 2012, while another gauge also improved. The data was released ahead of the country’s annual National People’s Congress, with traders expecting to hear more about Beijing’s economic plans.

“China’s in a relatively good place at the moment relative to other major economies in terms of the easing cycle,” Elizabeth Kwik, Asian equities investment director at abrdn, said on Bloomberg Television. Any growth stimulus signals from the government “will be something good to watch that might come out of the NPC,” she said, referring to the congress.

Wednesday’s rebound marks a reversal from recent weeks, when a re-pricing of peak US rates saw investors sell just about every risk asset. The Hang Seng China Enterprises Index jumped nearly 4% helped by tech and property stocks, rebounding after a loss of more than 11% in February.

The latest data “should keep the yuan on a firm footing” heading into the event, while “commodity currencies such as the Australian dollar may also be buoyed on expectations of a solid Chinese demand recovery,” said Wei Liang Chang, a strategist at DBS Bank Ltd.

A gauge of dollar strength fell and Treasury yields edged higher. Yields on Australian and New Zealand government bonds slipped.

Bond yields rose in Europe on Tuesday after hot inflation data caused a reassessment of rate expectations, picking up a theme has dominated trading in a month that saw the Federal Reserve signal its intention to ratchet rates higher than the market had been anticipating.

Bond traders no longer view the odds of a Fed rate cut this year as better than-even, a shift from what they were expecting just a month ago. Market expectations also see the European Central Bank raising rates through February 2024, with a 4% ECB terminal rate fully priced.

Key events this week:

Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
Eurozone CPI, unemployment, Thursday
US initial jobless claims, Thursday
Eurozone S&P Global Eurozone Services PMI, PPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 2:08 p.m. Tokyo time. The S&P 500 fell 0.3%
Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.1%
Japan’s Topix index rose 0.1%
Hong Kong’s Hang Seng Index rose 3.3%
China’s Shanghai Composite Index rose 0.9%
Australia’s S&P/ASX 200 Index was little changed

Currencies

The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.1% to $1.0591
The Japanese yen fell 0.2% to 136.41 per dollar
The offshore yuan rose 0.5% to 6.9183 per dollar

Cryptocurrencies

Bitcoin rose 2.7% to $23,777.69
Ether rose 3.2% to $1,657.44

Bonds

Commodities

West Texas Intermediate crude rose 0.6% to $77.49 a barrel
Spot gold rose 0.2% to $1,830.38 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Charlie Zhu, Wenjin Lv and Akshay Chinchalkar.