Asian Stocks Erase Earlier Gains, Bitcoin in Focus: Markets Wrap
(Bloomberg) — Asian shares fluctuated at the start of the week, with US economic data and earnings from AI bellwether Nvidia Corp. expected to shape the market narrative.
The MSCI Asia Pacific Index wiped out earlier gains and edged lower, while South Korea’s Kospi rose 1.7%. Equities in mainland China and Hong Kong also retreated. Japan’s Nikkei 225 fell 0.5% after the economy contracted for the first time in six quarters. Japanese tourism and retail-related stocks slumped amid tensions between China and Japan.
After a lackluster Friday session, risk appetite perked up as US equity-index futures advanced — S&P 500 contracts gained 0.2% and Nasdaq 100 futures rose 0.4%. Sentiment also brightened among cryptocurrencies, with Bitcoin climbing 1.4% after having wiped out its gains for the year.
After weeks of limited data, investors will finally get fresh signals on the health of the US economy as agencies begin releasing key indicators, including the employment figures. While that’s crucial to gauge the path for interest rates, traders are also navigating a mix of other factors, including stretched valuations in AI-related stocks.
“November so far has seen a pretty wobbly ride for shares,” Shane Oliver, chief economist and head of investment strategy at AMP Ltd., wrote in a note to clients. “Share markets remain at risk of a correction given stretched valuations, risks around US tariffs and the softening US jobs market.”
A gauge of global equities fell on Friday as uncertainty about Federal Reserve interest-rate cuts and stretched technology valuations weighed on sentiment.
The lofty AI valuations face a crucial test this week as investors look into Nvidia’s earnings on Wednesday to assess whether its soaring price tag is sustainable. The company’s stock has surged 42% this year, eclipsing returns in the S&P 500 and Nasdaq 100 indexes.
Another key factor for the week is the release of economic data that will provide clues on the Fed’s outlook. A slew of Fed officials have expressed skepticism over the need for a cut in December, or outright opposed one, less than a month after Chair Jerome Powell warned that a December cut is far from a “foregone conclusion.”
Last week, futures traders pushed the odds of a quarter-point rate cut in December below 50% as some Fed officials indicated that such a move is far from a sure thing.
“I do believe that Fed still has the potential to cut in December but that brings volatility,” said said Adrian Zuercher, co-head of Global Asset Allocation at UBS Global Wealth Management, in a Bloomberg TV interview.
What Bloomberg strategists say…
Bitcoin’s slump has the potential to get significantly worse if it extends much further. That’s because the token is trading perilously close to the point when the average retail investor would be facing losses, a dynamic that threatens to turn ETF flows into a fundamental downside driver rather than the steady tailwind they once provided.
— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.
Attention is also on the cryptocurrencies market. Just a little more than a month after reaching an all-time high, Bitcoin erased the more than 30% gain registered since the start of the year as exuberance over the pro-crypto stance of the Trump administration fades. The token advanced 1.6% to trade $95,000 on Monday.
In Japan, the economic contraction over the summer will support Prime Minister Sanae Takaichi’s case to compile an ambitious stimulus package even as the central bank stays on track for a rate hike in coming months.
Goldman Sachs Group Inc. sees a return of Japan’s fiscal risk premium as investors grow wary of a larger-than-expected stimulus package, putting pressure on longer-maturity sovereign bonds and the yen.
Among commodities, oil started the week lower while gold edged up. The precious metal has jumped more than 50% this year, putting it on course for its best annual gain since 1979.
Bullion was trading around $4,100 an ounce on Monday, having lost more than 2% in the previous session. Expectations for another rate cut were scaled back last week as Fed officials showed little conviction for reducing borrowing costs. Lower interest rates typically make non-yielding bullion more appealing to investors.
Corporate News:
US airlines will be able to resume normal operations starting Monday after more than a week of government-mandated flight reductions. Samsung Group and SK Group were among four of South Korea’s biggest companies that pledged to invest about $550 billion in the country after meeting with President Lee Jae Myung. A White House national security memo claimed Alibaba Group Holding Ltd. provided the Chinese military with technology support against targets in the US, the Financial Times reported. Boeing Co. said it will ensure its factories are ready to absorb a higher rate of aircraft output before lifting the tempo again next year. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.3% as of 10:49 a.m. Tokyo time Japan’s Topix fell 0.6% Australia’s S&P/ASX 200 fell 0.3% Hong Kong’s Hang Seng fell 0.6% The Shanghai Composite fell 0.6% Euro Stoxx 50 futures fell 0.1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro fell 0.1% to $1.1608 The Japanese yen was little changed at 154.56 per dollar The offshore yuan fell 0.1% to 7.1063 per dollar Cryptocurrencies
Bitcoin rose 1.5% to $94,849.75 Ether rose 1.7% to $3,125.14 Bonds
The yield on 10-year Treasuries was little changed at 4.14% Japan’s 10-year yield advanced one basis point to 1.715% Australia’s 10-year yield advanced five basis points to 4.49% Commodities
West Texas Intermediate crude fell 1% to $59.46 a barrel Spot gold rose 0.3% to $4,094.80 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi and Masaki Kondo.
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