Asian stocks rallied at the start of the week buoyed by positive earnings reports and promises of more stimulus in China but the pessimistic global outlook kept a lid on any gains.
Japanese shares notched their best day in about two weeks, helped by those upbeat earnings. The Nikkei share average rose 0.7% to close at 27,993 and the broader Topix climbed 1% to 1,960, their biggest gains since July 20.
The indexes marked their best months since late 2020 in July and with year-to-date losses of about 3% or less, both are outperforming world equities’ 15% drop, yet analysts say there aren’t many catalysts to drive a rally.
“Medium- and long-term investors are on the sidelines,” said Yutaka Miura, a senior equities analyst at Mizuho Securities, with domestic investors doing most of the buying on Monday.
Data and corporate results are likely to set the tone for the rest of the week.
Purchasing Managers’ Index figures in Japan and around Asia were soft, with Japan’s manufacturing activity in July expanding at its weakest rate in 10 months.
If US figures releasing later in the day are weak too, it might even help markets if investors think it will temper interest rate hikes.
China stocks rose after the country’s securities regulator chief said the agency will make stable capital market operations a top priority, while carmakers surged on hopes of rising demand for new energy vehicles.
China will use effective investment to help the economy recover and will not resort to flood-like stimulus, state media said on Friday.
To spur consumption, China will extend an exemption on purchase tax on “new energy” vehicles (NEV), following a cut to the car purchase tax, pushing automobiles and NEVs jumping more than 3% each.
The Shanghai Composite Index advanced 0.2%, or 6.72 points, to 3,259.96, while the Shenzhen Composite Index on China’s second exchange was ahead 1%, or 21.24 points, to 2,202.49.
China Real Estate Struggles
Real estate developers lost 2.6% and mainland developers traded in Hong Kong declined 2.5% to a record low, after a private survey showed July sales volume and new home prices both fell from a month earlier.
The Hang Seng Index was up 0.05%, or 9.33 points, to 20,165.84. But the Alibaba Group dropped 2.2% after it became one of the listed firms facing delisting risks from the United States.
Elsewhere across the region, shares in Singapore and Thailand advanced about 0.9% and 0.6%, respectively, while equities in the Philippines were down 1.1%.
Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.9%, or 153.25 points, at 17,311.50.
Globally, world stocks hit seven-week highs, lifted by recent strong corporate earnings and declining expectations for hefty interest rate rises, while the dollar slid against the yen as speculators exited suddenly unprofitable short positions.
Global shares gained 7% last month and bond markets rallied as investors started to look for a peak in official interest rates, given slowing economic growth.
Apple, Amazon Forecasts Upbeat
Markets have gathered steam after last week’s 75-basis-point Federal Reserve hike and comments on the economy from Fed chair Jerome Powell.
“There’s a sense of relief that the Fed have at least got an eye on slowing growth. They are not going to be pig-headed and keep hiking interest rates as the economy falls into deep dark recession,” said Giles Coghlan, chief currency analyst at HYCM.
In addition, upbeat forecasts from Apple and Amazon on Friday pushed the S&P 500 and the Nasdaq index to their biggest monthly percentage gains since 2020.
MSCI’s world equity index rose 0.2%. S&P futures dipped 0.2%, however, indicating a lower open on Wall Street, after the index rose 1.4% on Friday, also to seven-week highs.
Bond Markets Rally
The US ISM manufacturing survey for July is due at 1400 GMT, forecast to give an expansionary reading of 52, according to a Reuters poll.
“We don’t think the US is in a typical recession yet but will almost certainly be within a few quarters,” Deutsche Bank analysts said in a note.
Bond markets have also been rallying hard, with US 10-year yields falling 35 basis points last month in the biggest decline since the start of the pandemic. Yields were last at 2.6848%, after hitting their lowest in nearly four months on Friday.
Oil prices softened as weak manufacturing data from China and Japan weighed on the outlook for demand, while investors braced for this week’s meeting of officials from OPEC and other top producers on supply adjustments.
US crude fell 48 cents to $98.13 per barrel, while Brent was steady at $104.17.
Tokyo – Nikkei 225 > UP 0.7% at 27,993.35 (close)
Hong Kong – Hang Seng Index > UP 0.05% at 20,165.84 (close)
Shanghai – Composite > UP 0.2% at 3,259.96 (close)
New York – Dow > UP 1% at 32,845.13 (Friday close)
- Reuters with additional editing by Sean O’Meara