(Bloomberg) — Japanese stocks fell early Monday after ruling party elections raised expectations of further central bank interest rate hikes. Iron ore rose after several major Chinese cities eased home buying restrictions.
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The Nikkei and Topix indices fell at the opening after the victory of Shigeru Ishiba in the race for the leadership of the Liberal Democratic Party. Ishiba has said he supports the Bank of Japan’s path of independence and normalization in principle, and that the country needs to defeat deflation.
Australian shares also fell, while Hong Kong futures were stable. US contracts increased marginally. Iron ore futures rose 8% in Singapore after the cities of Shanghai, Guangzhou and Shenzhen eased rules on home buying, following the central government’s latest efforts to shore up the beleaguered real estate sector.
Markets are heading into the final quarter as global economic prospects improve following China’s stimulus measures and central banks from Indonesia to Europe to the United States begin to cut interest rates to support growth. U.S. stocks are expected to outperform Treasuries for the rest of the year, while emerging markets are preferred over developed ones, according to the latest Bloomberg Markets Live Pulse survey.
Traders are bracing for big swings in Chinese stocks on Monday, when economic activity data is released in the final trading session before the markets close for Golden Week, after the benchmark CSI 300 index registered its best week since 2008. The Shanghai Stock Exchange conducted stress tests over the weekend with brokerages. after its systems struggled to cope with a surge in trading activity on Friday.
The renewed demand comes after authorities stepped up efforts to revive growth with promises to support fiscal spending and stabilize the real estate sector. Stephen Jen, chief executive of Eurizon SLJ Capital, said a “major rally” in stocks, the yuan and government bonds is entirely possible if investors undervalue the country’s assets.
Still, global sentiment could take a hit on Monday if tensions in the Middle East rise. Oil rose in early trading on Monday as traders await the response to Israel’s killing of Hezbollah chief Hassan Nasrallah in an airstrike on the group’s headquarters in Beirut, Lebanon’s capital, on Friday.
The attack came after the United States, France and Arab countries sought to de-escalate the situation in recent days and prevent an Israeli ground offensive in southern Lebanon, which they fear could spark a war across the region.
Iran’s embassy in Beirut said Israel’s attacks are a dangerous escalation and will bring appropriate punishment. However, President Masoud Pezeshkian has stopped short of promising a direct and immediate attack on Israel in retaliation.
“For markets, it all comes down to what Iran decides to do,” Danske Bank’s Minna Kuusisto wrote in a note to clients. “A full-blown war in Lebanon would bring another war right on Europe’s doorstep, but markets will ignore human suffering as long as the oil trade remains intact.”
This week, traders will pay close attention to official manufacturing and services PMIs from China and Caixin on Monday before markets close for Golden Week. Data on eurozone inflation and manufacturing activity will be released ahead of Friday’s US jobs report, which will help gauge the prospects for Federal Reserve rate cuts towards the end of the year.
Some of the main movements in the markets:
Stocks
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S&P 500 futures were up 0.1% at 9:05 a.m. Tokyo time
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Hang Seng futures little changed
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The Japanese Topix fell 2.7%
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Australia’s S&P/ASX 200 rose 0.6%
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Euro Stoxx 50 futures up 0.8%
Coins
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Bloomberg Dollar Spot Index Little Changed
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The euro was little changed at $1.1169
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The Japanese yen fell 0.3% to 142.64 per dollar
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The offshore yuan was little changed at 6.9765 per dollar.
Cryptocurrencies
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Bitcoin fell 0.5% to $65,485.82
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Ether fell 0.2% to $2,655.15.
Captivity
Raw materials
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West Texas Intermediate crude rose 0.1% to $68.26 a barrel
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Spot gold rose 0.3% to $2,665.23 an ounce.
This story was produced with help from Bloomberg Automation.
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