China Shares Lead Muted Day in Asia; USTs Steady: Markets Wrap

(Bloomberg) -- Chinese stocks climbed in an otherwise lackluster day for Asian equity markets while Treasuries consolidated ahead of a report on US non-farm payrolls.

Most Read from Bloomberg

Trump Cites Self Incrimination Concern in Lawsuit Against Cohen

QQQ Churns in Late Hours on Apple, Amazon Earnings: Markets Wrap

Elon Musk Says Treasury Bills Are ‘No-Brainer’

China Official’s Call to Save Xi’s City Angers Flood Victims

Apple Surprises in China, Sets India High During Sales Slump

Stocks in Japan and South Korea edged higher while Australia’s shares slipped. Mainland China and Hong Kong equities rose, helped along by signs of official support for the private sector. The gains placed a gauge of Asian shares on track for its first advance since Monday.

The People’s Bank of China said it will step up its monetary support for the economy and help banks control liability costs at a Friday briefing. The comments followed a statement from the central bank in which it said it would increase funding support for the private sector after meeting with executives from the property industry.

US equity futures climbed ahead of non-farm payrolls data, retracing Wednesday’s minor losses for the S&P 500 and Nasdaq 100. The advance in futures was helped by gains of around 9% in after-hours trading for Amazon.com Inc. following robust results. This helped to offset a nearly 3% drop in post-market trade for Apple Inc. which undershot revenue expectations.

Another slide in longer-dated Treasuries put them on pace for their worst week of 2023. Yields on benchmark 10-year Treasuries were little changed in Asian trading after rising around 10 basis points on Thursday to set a fresh nine-month high.

Two-year yields, which are more sensitive to interest rate decisions, were also mostly steady on Thursday, suggesting the pressure on longer-dated paper was linked to investors digesting news of $103 billion in upcoming US debt issuance — and concerns about the ability of the market to absorb supply.

Australian and New Zealand 10-year bond yields climbed around seven basis points, echoing the selling pressure in Treasuries. A Bloomberg gauge of the dollar was little changed after strengthening more than 1% this week.

The Australian dollar held early gains after the country’s central bank revised forecasts for inflation to return to target levels by the end of 2025, later than previously expected, in a sign interest rates may have to remain higher for longer. China’s decision to scrap tariffs on Australian barley underscored a recent improvement in ties between the two countries.

READ: Bond Market on the Ropes Confronts Risk of Pivotal Jobs Report

Bill Ackman, founder of Pershing Square Capital Management, said he’s short 30-year Treasuries “in size” — as both a hedge against the impact of higher long-term rates on stocks and also as a standalone bet. Bill Gross, the one-time king of the bond world, noted he’s “overall bearish” on 10-year yields, while Berkshire Hathaway Inc. Chairman Warren Buffett told CNBC he had been buying Treasury bills and would likely continue. Tesla Inc.’s chief Elon Musk said that short-term T-bills are “a no-brainer.”

A report Thursday underscored resilient US demand for workers, while separate numbers showed productivity jumped the most since 2020, blunting labor costs. Those figures preceded the government’s employment data — forecast to show the US added 200,000 jobs in July. While that would be the weakest print since the end of 2020, it’s still a strong advance historically.

“The good news is that almost everyone agrees that an imminent recession isn’t very likely,” said Ed Yardeni, founder of his namesake research firm. “That reduces the downside concerns about corporate earnings, but it increases the downside potential for the stock market’s valuation multiple if the bond yield continues to rise.”

Steeper Yield Curve

Meantime, rate options traders are paying through the nose for protection against further increases in long-maturity Treasury yields. A metric that compares demand for bearish put options to demand for bullish call options shows the widest divergence since September for options on CME Group Inc.’s US Treasury Bond Futures contract, which currently tracks a bond that matures in 2039. The gaps are less extreme for options on shorter-maturity Treasury futures.

The steepening of the yield curve extended a trend since the Bank of Japan surprised markets last week with a policy tweak. At 4.88%, two-year yields are 71 basis points higher than those on the 10-year note. That’s compared to a gap of 102 basis points two weeks ago.

Elsewhere, oil rose after Saudi Arabia prolonged its unilateral production cut by another month and hinted that deeper reductions may be on the way, putting futures on course for their sixth weekly advance and adding to inflationary pressure.

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.3% as of 1:30 p.m. Tokyo time. The S&P 500 fell 0.3%

Nasdaq 100 futures rose 0.5%. The Nasdaq 100 fell 0.1%

Japan’s Topix rose 0.2%

Australia’s S&P/ASX 200 fell 0.2%

Hong Kong’s Hang Seng rose 1%

The Shanghai Composite rose 0.5%

Euro Stoxx 50 futures rose 0.3%

Currencies

The Bloomberg Dollar Spot Index was little changed

The euro was little changed at $1.0952

The Japanese yen was little changed at 142.55 per dollar

The offshore yuan fell 0.1% to 7.1914 per dollar

Cryptocurrencies

Bitcoin fell 0.5% to $29,127.8

Ether fell 0.6% to $1,830.93

Bonds

The yield on 10-year Treasuries was little changed at 4.17%

Japan’s 10-year yield was unchanged at 0.645%

Australia’s 10-year yield advanced seven basis points to 4.18%

Commodities

West Texas Intermediate crude rose 0.2% to $81.74 a barrel

Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Rob Verdonck.