Asia’s stock markets stay strong even as Wall Street falls and China’s trade disappoints.
After falling almost 2% at the end of last week, the U.S. dollar index went up 0.3%.
SYDNEY – U.S. stock futures and commodities fell in Asia on Monday after Beijing denied that it was thinking about changing its “zero COVID-19” policy. However, the strength of Asian stocks made the selling less painful.
On Friday, risk assets went up because people thought China might be getting ready to loosen its pandemic restrictions. However, over the weekend, health officials reaffirmed their commitment to the “dynamic clearing” approach to COVID cases as soon as they appear.
Tapas Strickland, head of market economics at NAB, said, “Despite the denials, it’s unlikely that the idea that China will switch to living with COVID in the new year will be put to rest, given the very real damage that zero-COVID is doing to the economy.”
“Because it’s winter in China, most analysts don’t think zero COVID will change until at least March.”
Copper jumped 7% on Friday, which was its biggest one-day gain since 2009, as people thought China might open up its economy. Other resources also did well, as people had hoped for more demand.
It also sent the yuan soaring and caused people with long positions in the U.S. dollar, especially against currencies that are sensitive to commodity prices, like the Australian dollar, to take their profits.
On Monday, the Australian dollar was worth $0.6421, which was 0.7% less than it had been on Friday. The offshore yuan lost 0.7% against the dollar.
After falling almost 2% at the end of last week, the U.S. dollar index went up 0.3%. At 147.22 yen, the dollar was 0.4% stronger than the yen. The euro, on the other hand, went down a bit to $0.9929.
Futures for the S&P 500 fell 0.2%, and futures for the Nasdaq fell 0.3%. Futures for the EUROSTOXX 50 and FTSE fell by 0.2% and 0.6%, respectively, after news that the UK government was planning to raise taxes and cut spending. go to site
Chinese blue chips (.CSI300) went up by 0.2%, which was a good result since earlier data showed that both Chinese exports and imports fell in October and missed expectations. go to site
Apple Inc. (AAPL.O) said on Sunday that COVID-19 restrictions will temporarily stop production of the iPhone 14 Pro and the iPhone Pro Max, which shows how expensive Beijing’s strict policies can be. go to site
Still, investors seemed to think that the story about China easing up might be true, and MSCI’s broadest index of Asia-Pacific shares outside of Japan (.MIAPJ0000PUS) went up by 1.0%.
The Nikkei in Japan went up 1.2%, and the South Korean market went up 0.8%.
U.S. CPI LOOMS
Reports that the White House is privately telling Ukraine to show that it is willing to talk to Russia about trade helped lower sentiment a little bit. go to site
Dealers were still figuring out what to make of a mixed U.S. jobs report. The payrolls survey showed strong gains, but the less reliable household survey of unemployment showed a drop. go to site
On Friday, four Federal Reserve policymakers said they would still consider a smaller increase in interest rates at their next policy meeting. They sounded less hawkish than Chair Jerome Powell. go to site
At least seven Fed officials are going to speak this week, which will help the markets get a better idea of what will happen with rates. Right now, the markets are leaning toward a half-point rate hike next month to 4.25–4.5%.
Bruce Kasman, head of economic research at JPMorgan, said, “We still think the Fed will see enough progress on inflation to pause at 4.75% in February, but the risks are tilted toward more hikes, which are likely to cause a recession later in 2023 or early in 2024.”
Short-term Treasuries had a small gain on Friday, with two-year yields going back up to 4.68 percent, which is still below the highs they reached in 2007.
When the U.S. consumer price index for October comes out on Thursday, it will be a big test for the market. If it comes out higher than expected, it will test hopes that the Fed will slow down its rate hikes.
The average prediction is that annual CPI inflation will slow to 8% and that core inflation will drop slightly to 6.5%.
On Tuesday, there will also be important midterm elections in the United States. If Republicans win control of one or both chambers, there could be a stalemate on fiscal policy.
Gold fell back to $1,671 an ounce on the commodity markets after rising by more than 3% on Friday.
Oil futures lost some of their recent gains, with Brent falling $1.07 to $97.50 per barrel and U.S. crude falling $1.26 to $91.35 per barrel.
