(Nov 6): Asian stocks were poised to rebound on Thursday, following Wall Street’s lead, where buyers stepped in after a brief retreat in technology shares and signs of a resilient US labour market boosted investor sentiment.
Equity-index futures for Japanese, Hong Kong and Australian benchmarks all pointed to gains at the open. The tech-heavy Nasdaq 100 Index gained 0.7% and the S&P 500 rose 0.4% on Wednesday following a sell-off. Gold rebounded and bitcoin rallied, while Treasuries slipped and the dollar wavered.
After a brief pullback that highlighted concerns over stretched valuations, buyers returned to the market as earnings momentum appeared intact and upbeat private economic data helped stocks move higher. ADP Research Institute figures showed US companies added jobs in October, while a separate report from the Institute for Supply Management indicated services activity expanded at the fastest pace in eight months amid a surge in new orders.
“For investors with cash on the sidelines, the recent market pullback seems like a good time to buy, especially for investors with a longer time horizon,” said Robert Edwards at Edwards Asset Management. “Earnings are crushing it and growing faster than revenues, and that often leads to multiple expansion.”
Treasuries fell after the US government signalled that larger auction sizes are on the horizon, while the signs of economic resilience hurt odds of a Federal Reserve (Fed) interest-rate cut in December.
Fed governor Stephen Miran described the latest increase in employment at companies as “a welcome surprise”, but reiterated rates need to be lower.
See also: Stocks tumble, bonds rise with yen on haven bid
Yields across maturities rose as much as seven basis points, with the longest-maturity tenors rising the most. Ten- to 30-year yields reached the highest levels since Oct 7, at 4.16% and 4.74% respectively.
Also in focus for Treasury investors was a US Supreme Court hearing on the legality of tariffs the White House began enforcing this year. The tariffs are behind a revenue surge for the federal government that helped narrow the deficit for the fiscal year that ended Sept 30, progress that might be arrested by an unfavourable ruling.
If the tariffs are reversed, the 10-year and the 30-year “are very vulnerable to a sudden and violent cheapening”, said John Brady, an interest-rates derivatives specialist at RJ O’Brien. The market will face “a not-nearly-as-good deficit situation”.
See also: Asian stocks fall after weak US data; dollar gains
In Asia, China raised US$4 billion in its return to the international bond market on Wednesday. The Ministry of Finance sold US$2 billion each of three- and five-year dollar notes, with no premium versus Treasuries for the former and just two basis points for the latter, according to a person familiar with the matter who requested anonymity discussing private matters.
Back to stocks, calm prevailed in the US on Wednesday, following a slide that knocked down several of the world’s biggest technology companies.
Concerns about a narrowing cohort of stocks driving equity gains have become louder, while a pivot in Fed commentary has put a dent in optimism over rate cuts. Technical indicators are increasingly flagging reasons for caution just as Wall Street chief executives warn about frothy valuations.
“Traders looking for fresh reasons to justify the lofty valuations that have carried markets this far were not finding too many compelling reasons. But they don’t want to sell either,” said Fawad Razaqzada at Forex.com.
With dip-buying being a major theme in equity markets, the downside has been limited after each pullback, he noted.
In commodities, gold rose as investors digested the US job data and the outlook for the Fed’s interest rate path. Elsewhere, oil extended a run of lacklustre trading on a persistent outlook for oversupply.
Uploaded by Isabelle Francis
