(Bloomberg) — Asian stocks ended a three-day sell-off, boosted by lower Treasury yields and a weaker dollar amid hopes of stronger policy support following a string of disappointing data from the United States, China, Japan and elsewhere.
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Equity benchmarks in Hong Kong, Japan and Australia rose, helping the MSCI Asia Pacific Index pare weekly losses. Stocks also rose on expectations of passive inflows as portfolios are rebalanced ahead of Friday’s changes to the MSCI benchmark index. U.S. stock futures fell in Asian markets while Treasuries extended gains. The dollar steadied after Wednesday’s slide and is on pace for a monthly decline.
In China, stocks ignored weak economic data. Asia’s largest economy posted weaker-than-expected manufacturing and non-manufacturing PMIs on Friday, showing manufacturing contracting again.
China’s PMI data “will certainly influence the pace of fiscal and monetary policy going forward,” Wendy Chen, senior investment analyst at GAM Investment Management Switzerland, told Bloomberg Radio. “We expect China to announce further policy support to address real estate and lingering inventory issues,” Chen said.
Slowing U.S. economic growth, weak manufacturing activity in China and contracting industrial production in Japan present growing challenges for central banks as they debate their next moves. The weakness in economic activity is emboldening investors betting on easier monetary policy around the world.
The yen fluctuated as Japan’s industrial production fell in April while the country’s unemployment rate remained unchanged. Still, Tokyo inflation, a national gauge, accelerated in May and the Bank of Japan is expected to consider raising interest rates in the coming months. Financial markets are pricing in about 29 basis points of hikes by the end of the year, up from 20 basis points at the start of May, according to data compiled by Bloomberg.
The S&P 500 index fell 0.6% to 5,235 on Thursday, led by a decline in tech stocks. U.S. authorities have delayed issuing licenses to semiconductor makers such as Nvidia and Advanced Micro Devices for large-scale shipments of AI accelerators to the Middle East, according to people familiar with the matter.
The dollar was stable and U.S. Treasuries extended gains in Asian trading on Thursday after a report showed the pace of U.S. economic growth slowed as spending and inflation both fell ahead of the release of the Fed’s preferred price gauge.
Markets are expecting the core PCE index to fall slightly in April from the previous month, and a smaller decline “could weigh a bit on the U.S. dollar,” said Christina Clifton, senior economist and strategist at Commonwealth Bank of Australia in Sydney.
Read: The Fed Thinks It’s Fighting Inflation. Think Again: Bill Dudley
Trump Verdict
Meanwhile, in Donald Trump’s hush money trial, a jury found him guilty of all 34 charges of falsifying business records, making him the first former U.S. president to be convicted of a crime. Trump is scheduled to be sentenced on July 11, but the guilty verdict creates a difficult legal and political path for him to face President Joe Biden in November as the presumptive Republican nominee.
“The expectation of a guilty verdict has been priced into the market to some extent,” said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi Asset Management in Boston. “If a guilty verdict starts to shift momentum from Trump to Biden, we could see a bigger impact on the market.”
Investors will turn their focus to European inflation data next week after the European Central Bank likely eases policy.
Major events this week:
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Eurozone Consumer Price Index, Friday
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U.S. Consumer Income, Expenditures and PCE Deflator Friday
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Federal Reserve President Raphael Bostic to speak on Friday
Some of the key market developments:
stock
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S&P 500 futures were down 0.1% as of 12:32 p.m. Tokyo time.
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Nikkei 225 futures (OSE) rose 0.9%
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Japan’s TOPIX rises 1.1%
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Australia’s S&P/ASX 200 rose 0.6%
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Hong Kong Hang Seng Index up 1%
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The Shanghai Composite Index rose 0.3%
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Euro Stoxx 50 futures fell 0.1%
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro fell 0.1% to $1.0818.
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The Japanese yen was almost unchanged at 156.81 yen to the dollar.
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The offshore yuan was little changed at 7.2551 per dollar.
Cryptocurrency
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Bitcoin little changed at $68,479.21
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Ether rose 0.6% to $3,761.58.
Bonds
merchandise
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West Texas Intermediate crude fell 0.5% to $77.55 a barrel.
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Spot gold fell 0.1% to $2,339.67 an ounce.
This story was produced with assistance from Bloomberg Automation.
–With assistance from Carter Johnson.
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