(Bloomberg) -- China’s most recent bid to tackle its property crisis lifted equity markets in the mainland and Hong Kong on Monday, while Tokyo shares dropped after a proponent of Bank of Japan tightening emerged victorious in the ruling party’s leadership race.
The benchmark CSI 300 index was headed for a technical bull market, and both iron ore and Chinese developer stocks surged after three major cities eased rules on housing purchases. The Nikkei and Topix indexes both fell after Shigeru Ishiba’s surprise victory wrongfooted investors who had bet on a boost from more monetary stimulus from his rival.
The markets are digesting “the combined impact of China’s stimulus, softer US inflation, rising geopolitical tensions, together with the surprise Japan LDP election results,” Michael Wan, an analyst at Mitsubishi UFJ Financial Group, Inc. wrote. “Our base case is for Ishiba to reflect the status quo of supporting Bank of Japan normalization and hence provide support for the yen.”
The yen fell as the market’s shock subsided over Shigeru Ishiba’s victory in the leadership race of the ruling Liberal Democratic Party.
Markets are heading into the final quarter as global economic outlook improves following China’s stimulus measures and as central banks from Indonesia to Europe and the US begin cutting interest rates to support growth.
The Federal Reserve’s preferred measure of underlying US inflation and household spending rose modestly in August, underscoring a cooling economy. Treasury yields and the dollar were little changed on Monday, with investors betting the Fed will stay on track for more rate cuts in the coming months.
US stocks are set to outperform Treasuries for the remainder of the year, while emerging markets are preferred to developed ones, according to the latest Bloomberg Markets Live Pulse survey.
Tensions in the Middle East were at risk of escalating once again, however, after Israel’s killing of Hezbollah’s leader, Hassan Nasrallah, in Beirut.
Oil was steady on Monday, with the market waiting to see how Iran will respond.
Iran’s embassy in Beirut said Israel’s strikes are a dangerous escalation and will bring about the appropriate punishment. President Masoud Pezeshkian however has stopped short of pledging a direct and immediate attack on Israel in retaliation.
“For markets, it boils down to what Iran decides to do,” Minna Kuusisto at Danske Bank wrote in a note to clients. “A full-blown war in Lebanon would bring another war right at Europe’s doorstep.”
This week, traders will be paying close attention to Eurozone inflation and manufacturing activity data are due before the US jobs report on Friday that will help assess the outlook for Federal Reserve rate cuts into year-end.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 10:43 a.m. Tokyo time
- Nikkei 225 futures (OSE) fell 4.2%
- Japan’s Topix fell 2.9%
- Australia’s S&P/ASX 200 rose 0.8%
- Hong Kong’s Hang Seng rose 1.7%
- The Shanghai Composite rose 4.5%
- Euro Stoxx 50 futures were unchanged
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1166
- The Japanese yen fell 0.3% to 142.57 per dollar
- The offshore yuan was little changed at 6.9869 per dollar
Cryptocurrencies
- Bitcoin fell 1% to $65,188.34
- Ether fell 0.8% to $2,640.02
Bonds
- The yield on 10-year Treasuries was little changed at 3.75%
- Australia’s 10-year yield declined two basis points to 3.94%
Commodities
- West Texas Intermediate crude rose 0.9% to $68.79 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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