Asian Stocks Gain, Led by China, as Yen Drops With Bonds

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By Emma O’Brien and Jonathan Burgos

A customer speaks to a receptionist at the Nine Hours Narita Airport capsule hotel in Japan. The country’s services sector contracted in August, according to data from Markit today, with the BOJ to issue its monetary policy statement tomorrow.

A customer speaks to a receptionist at the Nine Hours Narita Airport capsule hotel in…

A customer speaks to a receptionist at the Nine Hours Narita Airport capsule hotel in Japan. The country’s services sector contracted in August, according to data from Markit today, with the BOJ to issue its monetary policy statement tomorrow.

Asian stocks climbed, the yen slid to an almost eight-month low and bonds in the region tracked Treasuries lower amid signs of strength in the U.S. economy. Chinese shares jumped after gauges of services activity rebounded, while crude oil rallied.

The MSCI Asia Pacific Index rose 0.5 percent by 11:43 a.m. in Tokyo, as Hong Kong’s Hang Seng Index advanced 1 percent. Standard & Poor’s 500 Index futures were little changed after the benchmark U.S. index slipped 0.1 percent from a record. The yen dropped to as low as 105.27 per dollar, the weakest level since Jan. 10. Yields on 10-year Australian debt added nine basis points. Oil in New York rebounded 0.4 percent and gold climbed from the lowest level since June.

U.S. factory output grew in August at the fastest pace in three years, underlining the economy’s divergence with Europe and China, where gauges of manufacturing this week dropped more than analysts projected. A private gauge of non-manufacturing activity in China jumped the most on record after its lowest-ever reading last month. Japan and the euro area see service-industry data today, before the European Central Bank and the Bank of Japan update monetary policy tomorrow amid speculation over the outlook for stimulus.

“A strong U.S. economy is good for Asia, particularly the exporters,” Timothy Radford, a strategist at Rivkin Securities in Sydney, said by phone. “The rally in Japanese equities can be sustained as the the yen continues to weaken. There are still concerns about the Chinese economy as recent data have been disappointing. If we do see further weakness, we’d expect the government to implement more stimulus.”

Japan Gains

The Hang Seng Index briefly climbed back above 25,000 and a measure of Chinese companies listed in the city advanced 1.8 percent. The Shanghai Composite Index added 0.6 percent and is heading for its highest close since June last year.

An official non-manufacturing purchasing managers’ index for China’s services sector rose to 54.4 for August today, from 54.2 in July, while a similar gauge from HSBC Holdings Plc and Markit Economics jumped to 54.1 from 50. Factory gauges released Sept. 1 indicated Chinese manufacturing growth is slowing.

Japan’s Topix Index increased 0.6 percent, heading for its highest close since January, led by export-related companies. The Nikkei 225 Stock Average (NKY) added 0.8 percent in a third day of gains. Australia’s S&P/ASX 200 Index was little changed with the Kospi index in Seoul.

Dollar Index

The yen depreciated as much as 0.2 percent to touch its weakest level since Jan. 10, and was trading down 0.1 percent at 105.21 per dollar. Regarded along with gold and U.S. Treasuries as a haven investment, the yen lost more than 1 percent in each of the past two months amid a resurgence in the U.S. dollar.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after jumping 0.4 percent in New York to its highest close in almost a year. The Institute for Supply Management’s index of U.S. manufacturing unexpectedly climbed to 59 last month, the highest level since March 2011 and up from 57.1 in July. The result exceeded all forecasts in a Bloomberg survey of economists.

“The trend upwards in the U.S. dollar should keep the yen under pressure,” Janu Chan, an economist in Sydney at St George Bank Ltd., said by phone. Japan’s “economy is just struggling now with the sales-tax hike and the recovery from that is taking longer than what the Bank of Japan probably expected.”

Services PMIs

Japan’s services sector contracted in August, according to data from Markit today, with the BOJ to issue its monetary policy statement tomorrow. Markit’s euro-zone services PMI is expected to hold at 53.5 today, while retail sales may contract on a month-on-month basis for the first time since March.

Of the 57 economists surveyed by Bloomberg before the ECB’s policy review tomorrow, six are predicting the main refinancing rate will be reduced to 0.05 percent from the current 0.15 percent. ECB President Mario Draghi ignited speculation over a potential quantitative-easing program at the Federal Reserve of Kansas City’s annual symposium in Jackson Hole, Wyoming Aug. 22, saying policy makers will use “all the available instruments needed to ensure price stability.”

European money markets are pricing in about a 50 percent probability that the ECB will cut interest rates by 10 basis points this week, according to BNP Paribas SA.

Bond Markets

Australian bonds due in a decade yielded 3.44 percent, up for a third day after rates slid 19 basis points last week. Yields on similar-maturity New Zealand debt rose for the first time since Aug. 21, adding six basis points, or 0.06 percentage point, to 4.12 percent. Japanese 10-year notes paid 0.54 percent, the highest since the end of July.

Gross domestic product in Australia expanded 0.5 percent in the second quarter from the previous three months, when it grew 1.1 percent. That compares with a median of 0.4 percent growth predicted by economists surveyed by Bloomberg. Central bank Governor Glenn Stevens will speak in Adelaide today.

Yields on 10-year U.S. Treasuries were little changed at 2.43 percent after rising eight basis points in New York as trading resumed following the Labor Day holiday. It was the biggest increase in more than a month and came after 10-year yields slid 21 basis points in August, the most since January.

Rate Outlook

The U.S. manufacturing data bolstered speculation that the Fed may bring forward its timeline for higher U.S. interest rates. Reports last week showed U.S. GDP expanded more than previously forecast in the second quarter, propelled by the biggest gain in business investment in more than two years. A Labor Department report Sept. 5 will show the number of workers added to payrolls rose by more than 200,000 in August for a seventh straight month, according to a Bloomberg survey of economists.

West Texas Intermediate oil rose to $93.26 a barrel after sinking 3.2 percent last session from the Aug. 29 close to the lowest settlement price since Jan. 14. Brent crude rose 0.4 percent to $100.76 a barrel after tumbling 2.4 percent yesterday amid concern slowing manufacturing from Europe to China will crimp demand for fuel.

Gold climbed to $1,267.30 an ounce on the spot market, after slipping 1.6 percent yesterday to the lowest level since June amid the stronger dollar.

Russia, engaged in a conflict with Ukraine over its support for separatists in the former Soviet republic’s east, is the world’s No. 1 producer of palladium and the biggest energy exporter globally.

U.S. President Barack Obama is heading to eastern Europe to reassure NATO members of their security amid criticism from Russia over the U.S. approach to the tensions in Ukraine. Russian Foreign Minister Sergei Lavrov said Ukraine’s allies were stoking the five-month-old tussle and should back peace talks, while President Vladimir Putin sought to quell concern over remarks that his army could “take Kiev” in a matter of weeks. Ukraine has been strengthening its defenses.

To contact the reporters on this story: Emma O’Brien in Wellington at [email protected]; Jonathan Burgos in Singapore at [email protected]

To contact the editors responsible for this story: Emma O’Brien at [email protected]; Nick Gentle at [email protected] Nick Gentle

 

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