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Stocks Mixed With China, Adani, Fed in Limelight: Markets Wrap
(Bloomberg) — Stocks were mixed in choppy trading on Monday as investors split their attention between a reopening rally in mainland China, the plunge in Adani Group assets and looming interest-rate decisions in the US and Europe.
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The Shanghai Shenzhen CSI 300 Index was off its intraday highs but still about 20% above an October low and a chance of entering a bull market as onshore exchanges resumed after the week-long Lunar New Year holiday.
Japanese equities swung between gains and losses while benchmark indexes in Hong Kong and Seoul were decisively lower.
The rout in India’s Adani Group stocks swelled to $66 billion and its bonds were under pressure as the fight with short seller Hindenburg Research escalated. Adani Green Energy Ltd. and Adani Total Gas Ltd. fell more than 20% again.
This contrasted with optimism in bets that the Federal Reserve will slow the pace of rate hikes later this week, and in the advance on Wall Street Friday that saw traders brush off disappointing outlooks from some of the world’s largest technology companies to push the Nasdaq 100 up 1%.
The broader outlook for the Fed is keeping downward pressure on the dollar, which has helped Asian markets outperform the US this year. China’s pivot away from Covid Zero policies is also boosting the region, with indications over the last week that infections don’t appear to have gotten out of control during the festive season, while consumption statistics have supported wagers for economic recovery.
By midweek central banks are likely to dominate the agenda, beginning on Wednesday with the Fed, which is expected to downshift to a 0.25% increase in interest rates amid signs of cooling inflation.
A report Friday showed the Fed’s preferred inflation measures eased in December to the slowest annual pace in over a year and spending fell. Separate data from the University of Michigan showed US inflation expectations continued to retreat in late January, helping boost consumer sentiment.
“We look at the data flow and see a market that senses a positive outcome for risk assets and where pullbacks should be shallow,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. He also cautioned that this is “one of the biggest weeks of absolute tier 1 event risk in recent memory,” and added that the rise in commodities prices is concerning.
The European Central Bank and the Bank of England are each projected to hike by a half basis point when they deliver decisions a day after the Fed.
The nascent year’s tech resurgence gave the Nasdaq 100 its best week since November — with Tesla Inc. and Facebook parent Meta Platforms Inc. climbing at least 3% Friday. The gauge also notched its fourth straight weekly advance. That’s even after a bleak forecast from Intel Corp. that followed recent worrisome remarks from Microsoft Corp. and Texas Instruments Inc.
Elsewhere in markets, a gauge of dollar strength was little changed on Monday and Group-of-10 currencies mostly traded in relatively narrow ranges. The onshore yuan rallied in a catchup move.
The yen strengthened after a panel of experts said the Japanese government and the central bank should revise their joint policy statement to make an inflation target a long-term goal.
Japan’s 10-year yield fell 0.5 basis point to 0.47%, versus the central bank’s 0.5% ceiling. Benchmark 10-year Treasury yields were little changed.
Meanwhile, hedge funds are betting this year’s stellar start for Treasuries is too good to last, quietly building up the biggest bearish bet on bond futures on record.
An aggregate measure of net-short non-commercial positions across all Treasuries maturities has hit 2.4 million contracts, according to the latest data from the Commodity Futures Trading Commission as of Jan. 24.
Oil fluctuated as traders parsed signals on demand from China, and tracked an uptick in tensions in the Middle East after Israel was reported to have carried out a drone strike against a target in Iran.
Iron ore rose to a seven-month high as a drop in Chinese stockpiles added to optimism demand for the steel-making ingredient will rebound this year.
Key events this week:
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International Monetary Fund’s world economic outlook, Monday
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China industrial profits, PMIs, Tuesday
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Eurozone GDP, Tuesday
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US Conference Board consumer confidence, Tuesday
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Earnings Tuesday include: UBS, Unicredit, Snap and Advanced Micro Devices
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Eurozone Manufacturing PMI, CPI, unemployment, Wednesday
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US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
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FOMC rate decision, Fed Chair Jerome Powell press conference, Wednesday
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Earnings Wednesday include: Meta Platforms and Peloton Interactive
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Eurozone ECB rate decision, President Christine Lagarde press conference, Thursday
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UK BOE rate decision, Thursday
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US factory orders, initial jobless claims, US durable goods, Thursday
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Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm and Deutsche Bank and Santander
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Eurozone S&P Global Eurozone Services PMI, PPI, Friday
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US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.3% as of 2:41 p.m. Tokyo time.
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Nasdaq 100 futures fell 0.4%
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Japan’s Topix fell 0.1%
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Australia’s S&P/ASX 200 fell 0.2%
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Hong Kong’s Hang Seng fell 2%
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The Shanghai Composite rose 0.3%
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Euro Stoxx 50 futures fell 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 $1.0867
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The Japanese yen rose 0.2% to 129.63 per dollar
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The offshore yuan was little changed at 6.7516 per dollar
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The Australian dollar fell 0.2% to $0.7088
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The British pound rose 0.1% to $1.2397
Cryptocurrencies
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Bitcoin fell 0.4% to $23,693
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Ether fell 0.6% to $1,633.97
Bonds
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The yield on 10-year Treasuries was little changed at 3.50%
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Japan’s 10-year yield declined 0.5 basis point to 0.47%
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Australia’s 10-year yield declined three basis points to 3.53%
Commodities
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West Texas Intermediate crude fell 0.4% to $79.33 a barrel
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Spot gold rose 0.2% to $1,932.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
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