Tech Leads Asia Stock Gains as Turning Point Seen: Markets Wrap

(Bloomberg) — Technology shares in Hong Kong jumped, supporting a Asian equities, as investors see a potential turning point for the sector in China.

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The Hang Seng Tech Index advanced more than 1%, with strength in Alibaba Group Holdings Ltd. in Hong Kong Monday. News that large fines were imposed on Ant Group Co., an Alibaba affiliate, and on Tencent Holdings Ltd. was seen as signaling an end to a crackdown on Chinese tech companies.

Alibaba had surged 8% on Friday in the US, while an index of US-listed Chinese companies rallied more than 3%. Also, Ant is proposing to buy back as much as 7.6% of its shares.

An Asia equity benchmark fluctuated, helped by shares in Hong Kong and mainland China while weakness in Japan kept gains in check. US stock futures slipped after most American equities dropped Friday when wage data showed inflation remained a threat. The S&P 500 fell 1.2% over the holiday-shortened week, while the Nasdaq 100 dropped 0.9%.

Constructive dialogue between Beijing and Washington partially buoyed sentiment in Asia Monday. Treasury Secretary Janet Yellen’s two-day engagement with top officials in Beijing is seen as offering a way for the US and China to contain damage in their economies from the two nations’ intensifying rivalry.

Investors still face a host of competing forces as trading gets underway in Asia, including the risk of higher interest rates and recession. Latest data from China also show that the world’s second-largest country still lacked inflationary pressure.

“The fine on Ant Group and implied normalization of the regulatory environment for tech platforms is a more important driver for the markets today than CPI/PPI numbers that confirm a slowing economy, which is already priced in,” said Vey-Sern Ling, managing director at Union Bancaire Privee.

Treasury yields steadied, with the two-year remaining below 5% and the 10-year just above 4%.

The dollar edged higher against most of its Group-of-10 peers after the Bloomberg Dollar Spot Index slid on Friday. The offshore yuan was little changed after the People’s Bank of China set the daily reference rate stronger than estimated. The yen slipped and headed for the biggest decline this month.

A spate of jobs reports last week have tamped down speculation the Federal Reserve would leave interest rates unchanged later this month. The outlook beyond that was unclear. Government jobs data fell short of estimates but brought signs that wage inflation remained a threat to the Fed’s fight against price gains.

Inflation Data

Traders will be closely watching this week’s US consumer price print. Bloomberg economists are expecting the headline number to fall 3.1%, though they don’t see that stopping the Fed hiking at its meeting later this month. Reports from big banks including Citigroup Inc. and JPMorgan Chase & Co. may also set the tone for second quarter earnings.

Downside surprises in this week’s inflation indicators could charge up the bulls, taking the S&P 500 above the bull market’s channel, according to Ed Yardeni, president of his namesake research firm. “On the other hand, higher-than-expected inflation readings could heighten fears that the Fed will have to tighten monetary policy to cause a recession as the only clear way to bring inflation down.”

Yellen said over the weekend she wouldn’t rule out the threat of a US recession, noting that it was “appropriate and normal” for growth to moderate and that inflation remains too high.

Oil edged lower Monday after two consecutive weekly increases, and gold steadied.

Key events this week:

US wholesale inventories, Monday
Federal Reserve speakers include Mary Daly, Loretta Mester, Raphael Bostic and Michael Barr, Monday
Bank of England Governor Andrew Bailey delivers speech, Monday
St. Louis Fed President James Bullard speaks, Tuesday
Canada rate decision, Wednesday
US CPI, Wednesday
Federal Reserve issues Beige Book, Wednesday
Federal Reserve speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
China trade, Thursday
Eurozone industrial production, Thursday
US initial jobless claims, PPI, Thursday
US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 11:43 a.m. Tokyo time. The S&P 500 fell 0.3% on Friday
Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.4%
Japan’s Topix fell 0.5%
Australia’s S&P/ASX 200 was little changed
Hong Kong’s Hang Seng rose 1%
The Shanghai Composite rose 0.4%
Euro Stoxx 50 futures were little changed