Asia’s major stock indexes began the week on the front foot with investor mood lifted by hopes of a pause in the US Fed’s rate hikes campaign and upbeat news on services activity from China.
A private-sector survey showed service sector trade in the world’s second-largest economy accelerated last month but gains were capped there by continuing Sino-US tensions.
Japan, however, enjoyed a record rally with the Nikkei share average closing at its highest in 33 years as gains on Wall Street lifted risk appetite, while investors kept betting on domestic equities on expectations the Bank of Japan will retain its ultra-loose policy.
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The Nikkei index jumped 2.20% to end at 32,217.43, its highest close since July 1990 and posted its biggest daily gain since January 18. The broader Topix advanced 1.70% to 2,219.79.
On Friday, US stocks closed higher after a labour market report showing moderating wage growth in May indicated the Federal Reserve may skip a rate hike in two weeks, while Asia investors were still welcoming a Washington deal that avoided a catastrophic debt default.
China stocks edged ahead off the back of those positive service sector numbers but Sino-US tensions overshadowed the optimism.
The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 57.1 in May from 56.4 in April, as a rise in new orders shored up economic recovery in the second quarter.
Meanwhile, China’s military rebuked the United States and Canada for “deliberately provoking risk” after the countries’ navies staged a rare joint sailing through the sensitive Taiwan Strait.
The Shanghai Composite Index rose 0.07%, or 2.37 points, to 3,232.44, while the Shenzhen Composite Index on China’s second exchange edged down 0.09%, or 1.92 points, to 2,033.70.
Tech giants listed in Hong Kong edged higher and the Hang Seng Index gained 0.84%, or 158.56 points, to 19,108.50. The Hang Seng China Enterprises Index added 0.55%.
Elsewhere across the region, most other stock markets extended a global rally on optimism the Federal Reserve will pause its rate hikes this month, while oil prices jumped after Saudi Arabia pledged big output cuts.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was flat for the day.
US Jobs Lift
The optimism is set to run into some resistance in Europe, with pan-regional Euro Stoxx 50 futures down 0.2%. S&P 500 futures dipped 0.1% and Nasdaq futures dropped 0.4%.
Oil prices, which have recently come under pressure amid heightened concerns about China’s slowing economy, rose after Saudi Arabia announced it would cut its output to 9 million barrels per day in July, from around 10 million bpd in May, the biggest reduction in years.
Brent oil rose 1.2% to $77.07 a barrel by 0600 GMT, giving up some of its earlier gains to as high as $78.73, while US crude climbed 1.3% to $72.69 a barrel, after hitting a session high of $75.06.
Data on Friday showed the US economy added 339,000 jobs last month, higher than most estimates, but moderating wage growth and rising jobless rate led markets to continue to bet on no change in Fed rates this month, with a 75% chance priced in for that, according to the CME FedWatch tool.
Treasury yields continued to climb. Yields on US two-year Treasuries rose 3 basis points to 4.5410%, on top of a surge of 16.2 bp on Friday, and 10-year yields also climbed 3 bps to 3.7216%, after a rise of 8 bps on Friday.
The US dollar was at 104.11 against its major peers, after gaining 0.5% on Friday on the jobs report. The greenback also rose 0.1% on the Japanese yen to 140.03 while the euro eased 0.1% to $0.1070.
Key figures
Tokyo – Nikkei 225 > UP 2.20% at 32,217.43 (close)
Hong Kong – Hang Seng Index > UP 0.84% at 19,108.50 (close)
Shanghai – Composite > UP 0.07% at 3,232.44 (close)
London – FTSE 100 > UP 0.53% at 7,647.78 (0934 GMT)
New York – Dow > UP 2.12% at 33,762.76 (Friday close)
- Reuters with additional editing by Sean O’Meara
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