Asian Equities Led Higher by China on Policy Moves: Markets Wrap

(Bloomberg) — Asian equities advanced on Monday with a tailwind from the biggest weekly gain in US stocks since June and China’s policy shifts on Covid curbs and the property sector.

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A gauge of the region’s shares headed for the highest in more than two months, led by an extended rally in Hong Kong and mainland China. Contracts for the S&P 500 and Nasdaq 100 declined as the dollar climbed.

Stocks in Japan were lower amid a slump of more than 10% in SoftBank Group Corp. after the company failed to announce a widely-expected stock buyback.

The rally in Chinese equities comes as an easing of quarantine rules intensified bets that Beijing was backing away from its stringent Covid Zero stance. Sweeping relaxation measures in property added to signs that President Xi Jinping had turned his attention to rescuing the economy, sending the shares and dollar bonds of developers higher.

“So much negative news flow has been now factored into price,” Catherine Yeung, an investment director at Fidelity International, said of Chinese stocks on Bloomberg Television. “It just feels that China is likely to have seen its worst.”

The dollar’s move Monday followed Federal Reserve Governor Christopher Waller saying that policy makers still had “a ways to go” before ending interest-rate hikes.

While Waller sees the hiking cycle continuing for some time, he said the Fed could start considering a downshift to a 50 basis-point move at the next meeting in December or the one after that.

A gauge of the greenback had slumped more than 1% on Friday and fell for a fourth straight week in its worst performance since 2020.

The greenback had been sliding amid signs of cooling in US inflation and the prospects of a dovish tilt by the Fed. The University of Michigan’s preliminary November survey on Friday showed US consumer inflation expectations increased in the short and long run while sentiment retreated.

Treasury yields rose across the curve in Asia after cash trading was closed for Veterans Day on Friday.

Cryptocurrencies remained under pressure amid FTX’s deepening woes. A swift plunge inthe value of FTX’s key crypto assets and unauthorized withdrawals of funds after it filed for bankruptcy suggest customers have little chance of recovering much of their deposits.

Investors will keep a wary eye on the Group of 20 summit in Indonesia, where US President Joe Biden and Chinese leader Xi are expected to meet. Biden’s hand has been strengthened by the Democrats defying political forecasts and historical trends to keep control of the Senate.

Oil advanced for a third session as investors weighed the outlook for Chinese demand as the market tightens heading into winter.

The positive sentiment from China also filtered through to Australian iron ore miners and steel companies as their shares surged. Gold declined on the stronger dollar.

Key events this week:

US President Joe Biden plans to meet Chinese President Xi Jinping on the sidelines of the G-20, Monday
Fed’s John Williams moderates panel, Monday
China retail sales, industrial production, surveyed jobless, Tuesday
Former US President Donald Trump plans to make an announcement, Tuesday
US empire manufacturing, PPI, Tuesday
US business inventories, cross-border investment, retail sales, industrial production, Wednesday
Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
ECB President Christine Lagarde speaks, Wednesday
Eurozone CPI, Thursday
US housing starts, initial jobless claims, Thursday
Fed’s Neel Kashkari, Loretta Mester speak, Thursday
US Conference Board leading index, existing home sales, Friday