The dollar strengthened as a haven while Asian stocks climbed amid market sentiment over the prospects of China easing its Covid-Zero stance. The US and European equity futures were lower.
As investors looked beyond the risks of a disease policy to put into Chinese tech and property companies, Hong Kong advanced, quickly reversing initial declines. The index of the MSCI Asia Pacific Index was on course for a one-month highest as a result of the rising of benchmarks across Asia.
It was a different picture in currency markets, where the dollar was stronger against all of its Group-of- 10 counterparts. The Australian and New Zealand dollars saw the largest drops due to their sensitivity to the outlook for Chinese economic growth. Oil and gold remained down but above their lows for the session.
People familiar with the plans said that confidence was also affected after Apple Inc. said it expected to produce at least three million fewer iPhone 14 handsets than originally anticipated this year.
Markets continue to be battered as traders veer between hope of China reopening from Covid-19 and the fear that harsh curbs will be put in place. On Saturday, Chinese officials pledged to remain unwaveringly strict in Beijing's approach to stamping out the coronaviruses. The nation's shares had rallied aggressively on Friday on bets for an easing of the virus curbs.
David Chao, global market strategist for the Asia Pacific ex-Japan at Invesco Ltd., said that the sentiment on Chinese stocks is so low that any potential catalyst would send stocks racing. If you look at the stocks that have benefited, it's the large-cap tech stocks and I am not surprised. The debate over China's outlook comes as investors struggle with the effects of Federal Reserve interest-rate hikes. The US data showing strong hiring and wage increases along with higher unemployment shows a mixed picture for Fed officials who are debating how long it will take to curb rising inflation.
Over the next three to four months, the dollar will continue to move higher, Mahjabeen Zaman, head of FX research at Australia New Zealand Banking Group Ltd., said on Bloomberg Television. That is a continuation of the recent FOMC Fed meeting we had where they said they were going to slow the pace but push peak rates. Two-year US yields, which are more sensitive to imminent policy moves, increased slightly on Monday, while 10 year yields fell.
Even if prices start to moderate, the CPI is well above the comfort zone of the Fed.
Some of the main moves in markets are:
The yield on 10 year Treasuries declined one basis point to 4.15%.
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