MSCI Asia Pacific fell into the red, after Hong Kong’s Hang Seng gave up almost all of its 1.4% gains. Japanese stocks and US futures also fell. The yuan rose amid signs of policy support and a stronger central bank.
Last undertakes By Beijing to improve conditions for private companies fails to gain traction in the markets as traders point to a lack of concrete measures. China’s efforts to revive growth, from cutting prices to ending a regulatory crackdown on tech companies, have so far done little to shore up growth in the world’s second-largest economy.
“There will be a rapid shift in general sentiment in the Chinese market, and we could see portfolio flows returning to China very quickly,” Qi Lu, chief market strategist for Asia-Pacific at BNP Paribas Asset Management, said on Bloomberg TV.
On Thursday, the People’s Bank of China intervened with its own action by setting the daily peg for the yuan with biggest bias Since November it has been seeking to boost the currency, which has fallen more than 3% this year. The offshore yuan gained the most in more than a week and was the best performing currency in Asia.
“The People’s Bank of China (PBOC) may have to resist a weaker yuan for a while longer,” said Mingze Wu, a currency trader with StoneX Group in Singapore. “The bright side is that China’s consumer market is huge and they are self-sustaining if need be. So compared to many other countries that enact capital controls, China will be in a much better position to succeed in defending the yuan where everyone else fails.”
The dollar fell against all of its G10 peers, and the dollar gauge extended its month-to-date weakness to more than 6% on speculation that the Fed’s hike cycle may have peaked as inflation subsides.
Yen rose. Data earlier showed that Japan’s trade balance unexpectedly swung into a surplus in June, the first since July 2021.
Strategists at Goldman Sachs Group Inc. Including Jenny Grimberg in a note: “Cooler inflation expectations and associated political implications mean that the recent dollar sell-off could be extended in the near term, particularly against higher-yielding emerging-market forex currencies.” “However, we maintain that the broad decline in the dollar’s value over the course of this year is likely to be shallow and mild.”
Evidence of easing price pressures in the US and UK boosts hopes among investors that the monetary policy tightening campaign is drawing to a close.
Treasuries held steady after a rally on Wednesday as British inflation fell to a 15-month low, adding to evidence that central banks can make it easier to raise interest rates. However, the increases eased as commodity prices rose after a warning from Russia that any ships bound for Ukraine would be considered carrying weapons.
Meanwhile, investors will be watching results from Taiwan Semiconductor Manufacturing Co. scheduled for Thursday to continue gauging demand in the semiconductor industry. Sales at the world’s largest supplier of custom-made chips fell for a third month last month.
S&P 500 and Nasdaq 100 futures fell in Asia after Netflix Inc. In after-market trading, sales missed estimates and lowered its third-quarter forecast. Tesla also fell after profitability shrank in the second quarter, in a sign of shrinking margins for the electric car maker.
Elsewhere, Oil stabilized as demand concerns persisted and dollar strength was offset by lower US crude inventories. Gold rose towards its highest level since May. DM