Tokyo, Aug. 4 (BNA): Asian stocks rose in a choppy session on Thursday as some of the tensions over Nancy Pelosi’s visit to Taiwan dissipated and as investors benefited from strong US data and earnings.
Technology shares in Hong Kong led the recovery bid with a gain of 2.8%, mired in some losses incurred as the Sino-US frictions erupted during a visit to Taipei this week by House Speaker Pelosi, which angered China, Reuters reported.
The Hang Seng Index is up 1.7%. Japan’s Nikkei rose 0.7%. MSCI’s broadest index of Asia Pacific shares rose 0.5% and crude oil prices were flat after sliding on news of slowing demand and oversupply.
S&P 500 futures were down 0.1% in the Asian afternoon. European futures rose 0.3% and FTSE futures settled as expectations of the largest rate hike from the Bank of England in 27 years loomed on market mood.
A 50bp rally is costly, so the GBP may suffer in the absence of a hawk’s surprise – especially as the UK economic outlook looks weak while US data provided some bullish surprises.
The British pound settled at 1.2157 dollars.
Wednesday’s ISM survey showed that the US service industry unexpectedly rebounded in July, leading to sell-offs in bonds and gains in US stocks and the dollar, with the Nasdaq rising 2.5% to a three-month high.
“The rally had a gold-block type feel,” said Brian Dangerfield, head of foreign exchange strategy at the G10 Group.
“Broader risk markets seemed eager to embrace the growth signal provided by the ISM reading, while (being) relatively less concerned about tightening financial conditions supporting the data.”
Fed officials delivered a hawkish chorus this week, hitting the short end of the yield curve. Two-year Treasury yields are 3.0815% in Asia and are up 18 basis points this week. The benchmark 10-year bond yield was 2.7191%.
Currency markets have also been hit by an air pocket as uncertainty circulates over growth prospects and rates. The dollar halted its decline that began in mid-July, supported by rising expectations and escalating political tension.
Fed fund futures remain priced to cut interest rates by the middle of next year and the inversion of the US yield curve, with 10-year yields below 2-year yields, suggests investors believe the upward trajectory will hurt growth.
“I think the market will continue to be volatile,” said David Ratliff, head of banking and capital markets for Asia Pacific at Wells Fargo in Hong Kong. “People are starting to read the current round and pace of Fed tightening.”
The dollar index settled at 106.390. The euro was bought by the European energy crisis at $1.0165. The Australian dollar enjoyed a small spurt from the record Australian trade surplus and rose 0.2% to $0.6968.
The Saber rumble in the Taiwan Strait took a bit of a back seat in the Asian trading session, but bumpy trade in Chinese markets was evidence that investors see plenty of remaining risks.
China launched an unprecedented live-fire military exercise in six regions surrounding Taiwan, a day after Pelosi’s visit.
Brent crude futures settled at $96.81 a barrel.
And the spot gold price rose 0.4 percent to 1771 dollars an ounce.
Earnings are scheduled for Alibaba, Credit Agricole, Lufthansa LHAG.DE and Bayer later today.
MI