Asian Shares Pare Gains as Focus Switches to China: Markets Wrap

(Bloomberg) -- Asian equities pared gains Friday as investors awaited the outcome of a key legislature meeting in China that’s expected to unveil policy support to boost flagging growth.

China’s CSI 300 Index gave up an early advance as traders debated whether any measures from the meeting of the Standing Committee of the National People’s Congress, the equivalent of parliament in China, will be enough to counter the threat of higher tariffs under a second Donald Trump presidency.

Elsewhere in the region, Australian and Taiwan shares climbed, supporting a second day of gains for a region-wide equity gauge. That was after the S&P 500 advanced 0.7% and the Nasdaq 100 jumped 1.5% in US trading as the Federal Reserve cut interest rates. Treasuries and US equity futures were both little changed in Asian trade. 

Possible measures from China may include support for local government debt and consumer spending, according to Michelle Lam, greater China economist for Societe Generale SA. Any new policies must be balanced against the prospect of potential tariffs, she said, noting that the 60% levies proposed by Trump may fail to emerge.

“We have so much uncertainty coming from the US tariffs,” Lam said. “We might see some smaller increase in tariffs of around 15% to 20% and that is more reasonable” for the Chinese economy to absorb, she said.

Thursday’s cross-asset rally was helped along by comments from Fed Chair Jerome Powell who pointed to the strength of the US economy and said he doesn’t rule “out or in” a December rate cut. Powell added the election will have no effect on policy in the near term, and said he would not step aside if asked by Trump.

“Powell & Co. reminded investors about the solid economic footing the US continues to stand on,” said Bret Kenwell at eToro. “Powell would not tip his hand on whether the Fed would likely cut rates in December, which shouldn’t surprise investors. However, the Fed appears more comfortable with the labor market and the current US economic backdrop than they did a few months ago.”

Nissan Motor’s shares fell as much as 10% in Tokyo, touching their lowest since October 2020, after the automaker said it will dismiss 9,000 workers and cut a fifth of its manufacturing capacity after net income plummeted in the first half.

United Overseas Bank rose in Singapore as the lender plans to consider a share buyback and reported higher-than-expected earnings. Singapore banks are expanding wealth management services to generate extra fees and mitigate the impact of lower interest rates.

Local Chinese banks are joining more higher-yielding offshore loans of mainland firms as rates fall at home amid monetary easing measures. South Korea said it will bolster its monitoring of financial markets and respond “actively” to ease any excessive volatility.

Bloomberg’s dollar index edged higher in Asia after sliding 0.8% Thursday, its worst day since August, as the greenback trimmed its post election gains. The yen continued its rally against the dollar for a second session.

The yen is likely to come under pressure against the dollar if the US tries to contain inflation with higher interest rates, Japan’s Democratic Party for the People head Yuichiro Tamaki told reporters.

Fed officials unanimously lowered the federal funds rate 25 basis points and tweaked language to note “labor market conditions have generally eased,” and repeated “the unemployment rate has moved up but remains low.” The statement removed the reference to “further” inflation progress, noting inflation “has made progress toward the committee’s 2% objective but remains somewhat elevated.”

A Bloomberg gauge of the “Magnificent Seven” megacaps added 2.3%. Lyft Inc. jumped 23% after the ride-hailing company gave a bullish outlook. A closely watched gauge of banks dropped 2.7% after gaining over 10% in the previous session. JPMorgan Chase & Co. slid 4.3% after an analyst downgrade.

Gold trimmed some of its advance from Thursday, while oil headed for a weekly gain. Bitcoin dropped for the first time in four days.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 1:45 p.m. Tokyo time
• Nikkei 225 futures (OSE) rose 0.4%
• Japan’s Topix fell 0.3%
• Australia’s S&P/ASX 200 rose 1%
• Hong Kong’s Hang Seng fell 0.9%
• The Shanghai Composite fell 0.5%
• Euro Stoxx 50 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.2% to $1.0780
• The Japanese yen rose 0.2% to 152.70 per dollar
• The offshore yuan fell 0.2% to 7.1609 per dollar

Cryptocurrencies

• Bitcoin was little changed at $75,966.95
• Ether rose 0.4% to $2,906.75

Bonds

• The yield on 10-year Treasuries was little changed at 4.33%
• Japan’s 10-year yield declined one basis point to 0.990%
• Australia’s 10-year yield declined eight basis points to 4.56%

Commodities

• West Texas Intermediate crude fell 0.8% to $71.81 a barrel
• Spot gold fell 0.5% to $2,694.27 an ounce

This story was produced with the assistance of Bloomberg Automation.

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