Asia Futures Rise After U.S. Jump on Economy as Oil FallsEmma O’Brien and Adam Haigh
Asian equity futures rose, tracking a rebound in U.S. stocks after better-than-estimated data bolstered the outlook for the world’s largest economy and concern over China’s cash crunch eased. Crude oil fell the first day this week and copper futures declined.
Futures due in September on Japan’s Nikkei 225 Stock Average, which closed at 13,170 in Chicago and 12,940 in Osaka, were bid in the pre-market at 13,200 by 8:05 a.m. local time. Contracts on Hong Kong’s Hang Seng Index gained 1 percent, while S&P/ASX 200 Index futures climbed 0.6 percent in Sydney. Standard & Poor’s 500 Index futures were little changed, after the gauge rose 1 percent in New York after a 1.2 percent slump June 24. The dollar strengthened against other major currencies including the yen. Copper futures lost 0.3 percent.
Almost a week after the Federal Reserve said an improving economy could spur reductions in stimulus, data in the U.S. showed durable goods bookings climbed in May and house prices, new-home sales and consumer confidence beat economists’ estimates. Chinese stock volatility is the highest since 2011, while the People’s Bank of China said in a statement late yesterday it will use tools to ensure money-market stability and that the shortage of cash will abate.
“The whole story over the last few weeks has been a better U.S. economy than people expected,” Michael Shaoul, Chairman and CEO of Marketfield Asset Management LLC where he helps manage the MainStay Marketfield fund that beat 96 percent of its peers in the past five years, told Bloomberg TV. “That is ultimately going to be good for the equity market.”
The S&P 500 rebounded from the lowest close in nine weeks. The index has climbed 11 percent this year and is up 1.2 percent for the quarter and down 2.6 percent in June, poised for its worst month in more than a year.
Global stocks retreated June 24 as Chinese equities entered a bear market amid concern a cash crunch will hurt growth in Asia’s largest economy.
China’s CSI 300 Index closed down 0.3 percent yesterday after losing as much as 6.8 percent, while the Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York rose 1.9 percent. Futures on the Hang Seng China Enterprises Index of mainland Chinese stocks traded in Hong Kong added 1.2 percent today, rising for the first time in six days.
“People are still digesting the news from the Fed, making mental adjustments for different levels of interest rates and what those might imply for securities’ prices over the next several quarters,” John Carey, a fund manager at Boston-based Pioneer Investment Management Inc., said by phone yesterday. His firm oversees about $208 billion. “I’m encouraged the market has stabilized a little here,” he said. “It’s not a robust recovery of share prices but it’s at least a little bit of improvement after last week.”
The U.S. durable-goods data showed that excluding transportation equipment, where demand is volatile month to month, orders advanced 0.7 percent, topping projections. A separate report showed the S&P/Case-Shiller index of home values for 20 cities climbed 12.1 percent for the year ended April, the most since March 2006, after a 10.9 percent gain in March.
Sales of new U.S. homes in May rose to the highest level in almost five years, gaining 2.1 percent to an annualized pace of 476,000 homes to exceed all estimates in a Bloomberg survey of analysts, Commerce Department figures showed. The Conference Board’s index of U.S. consumer confidence increased to 81.4 in June from 74.3 a month earlier.
The MSCI Emerging Markets Index rebounded from a one-year low, rising 0.3 percent, while MSCI’s Asia Pacific Index ended yesterday 0.6 percent lower. The regional benchmark is trading at a valuation of 11.5 times projected earnings, the cheapest level since November, data compiled by Bloomberg show.
The Chinese central bank’s statement came hours after Ling Tao, deputy director of the Shanghai branch of the PBOC, said officials will closely monitor the money-market rate and keep it at reasonable levels.
Ling is the first PBOC official to discuss publicly the increase in rates since a cash squeeze helped send the overnight repurchase rate to a record last week. Premier Li Keqiang is seeking to wring speculative lending out of the nation’s banking system after credit expansion outpaced economic growth.
The cost to protect against swings in Chinese stocks for a month is surging versus longer-dated options as policy makers sacrifice growth to make the economy less reliant on credit.
Implied volatility for one-month contracts on the iShares FTSE China 25 Index exchange-traded fund has climbed 41 percent in the past two weeks to 32.6 yesterday, according to data compiled by Bloomberg on options that can be exercised near the ETF’s current level. That compares with a 9.8 percent gain to 26 for 12-month contracts, the widest gap since November 2011.
Yields on 10-year U.S. Treasuries climbed from a record-low 1.379 percent set July 25, 2012 to 2.6 percent in New York. The five-year average is 2.75 percent. Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE index climbed to 110.98 June 24, the most since November 2011. The daily average this year is 61.54.
Volatility in currencies has surged since the Fed signaled June 19 that it may start reducing stimulus this year and stop the quantitative easing program in 2014. JPMorgan Chase & Co.’s Group of Seven Volatility Index, based on currency option premiums, was at 11.52 percent yesterday after rising to 11.96 percent June 24, the highest level since January 2012.
The yen weakened 0.3 percent to 98.12 per dollar and lost 0.3 percent to 128.31 against the euro. The Dollar Index, which measures the U.S. currency against six major peers, climbed for a fifth day, rallying 0.2 percent yesterday.
The Australian dollar was little changed at 92.56 U.S. cents, while New Zealand’s currency fell 0.1 percent to 77.34 cents. The so-called kiwi is still too strong as the pickup in the U.S. economy has taken longer than expected, New Zealand Finance Minister Bill English said in a Bloomberg TV interview. The currency has dropped more than 10 percent since peaking above 86 cents April 11.
Crude declined 0.3 percent to $95.07 a barrel, after rising 0.2 percent yesterday. Platinum slipped 0.2 percent while palladium fell the same amount. Gold was little changed at $1,275.40 an ounce after retreating 0.2 percent yesterday. Morgan Stanley joined banks including Goldman Sachs Group Inc. and UBS AG in lowering its forecasts for gold on prospects the Fed will scale back monetary stimulus and as the U.S. economic recovery dims the precious metal’s appeal as a safe haven.
Orange juice futures for September delivery sank 4.4 percent in U.S. hours, the biggest decline for a most-active contract since March 1 and headed for the biggest monthly slump in more than a year on signs of slowing demand in the U.S.