Chinese Tech Stocks Drag Asia Lower as Rally Skids: Markets Wrap

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(Bloomberg) — Stocks in Asia snapped a three-day winning streak, mirroring a halt in Wall Street’s rally as investors wait on US payrolls data and Federal Reserve minutes for clues on interest rate cuts. 

Chinese stocks in Hong Kong fell as much as 2%, driving equities in Asia lower. Technology stocks slumped on concerns over the country’s consumption outlook, Walmart Inc.’s planned exit from JD.com Inc. and poor earnings from key players including Kuaishou Technology.  

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The dollar steadied after weakening for three sessions as markets also await Fed Chair Jerome Powell’s Jackson Hole speech on Friday for more clues on the amount and timing of the interest-rate reductions. The Bloomberg Dollar Spot Index was little changed, while the Thai baht rose to its highest since July 2023 ahead of the country’s central bank decision. 

“It’s probably time for a breather after the furious risk rally of the past fortnight,” Alvin Tan, head of Asian currency strategy at Royal Bank of Canada in Singapore, said. “The turbulence at the beginning of the month is fading further in the rear view mirror. The US dollar has been under significant pressure since Monday. Part of this has to do with the global risk rally.” 

Shares also declined in Tokyo, shrugging off improving exports data. Japan’s equities dropped as the yen’s advance raises worries about earnings. The local currency steadied at around 145 against the dollar after rallying Tuesday.

Elsewhere in Asia, policymakers in Indonesia and Thailand are tipped to keep interest rates unchanged on Wednesday as they weigh uncertainties over political transitions while awaiting the Fed’s imminent easing. Australian 10-year yields fell six basis points in morning trading. 

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Aside from flows and positioning, the recent rally was also fueled by bets the Federal Reserve will signal it’s getting closer to cutting rates, leading bond traders to take on record amounts of risk as they anticipate a Treasury market rally. 

The S&P 500 fell below 5,600 Tuesday as Nvidia Corp. — which had rallied almost 25% in six days — led losses in megacaps. Treasury 10-year yields were little changed after declining six basis points. Brent crude declined a third day on the back of a potential cease-fire in Gaza and mounting concern about the global demand outlook, while gold hit a fresh record high.

Dan Wantrobski at Janney Montgomery Scott says he continues to anticipate ongoing stock-market strength on a near-term basis, but remains on “high alert” for another, potentially bigger corrective wave moving through the August-October time frame. 

“From a timing perspective, we are headed into a window where there may be high probability for a liquidity event to occur — and the charts, trader positioning, and sentiment are all very vulnerable right now in our view,” Wantrobski said. “We smell a ‘bull trap’ ahead. But hope we’re wrong.”

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Key events this week:

• US Fed minutes, BLS preliminary annual payrolls revision, Wednesday
• Eurozone HCOB PMI, consumer confidence, Thursday
• ECB publishes account of July rate decision, Thursday
• US initial jobless claims, existing home sales, S&P Global PMI, Thursday
• Japan CPI, Friday
• Bank of Japan Governor Kazuo Ueda to attend special session at Japan’s parliament to discuss July 31 rate hike, Friday
• US new home sales, Friday
• Fed Chair Jerome Powell speaks at Jackson Hole symposium in Wyoming, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 11:52 a.m. Tokyo time
• Japan’s Topix fell 0.6%
• Australia’s S&P/ASX 200 fell 0.4%
• Hong Kong’s Hang Seng fell 0.7%
• The Shanghai Composite fell 0.2%
• Euro Stoxx 50 futures were little changed
• Nasdaq 100 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1123
• The Japanese yen was little changed at 145.30 per dollar
• The offshore yuan fell 0.1% to 7.1263 per dollar
• The Australian dollar was little changed at $0.6742

Cryptocurrencies

• Bitcoin rose 0.3% to $59,465.59
• Ether rose 0.2% to $2,596.16

Bonds

• The yield on 10-year Treasuries was little changed at 3.81%
• Japan’s 10-year yield declined two basis points to 0.870%
• Australia’s 10-year yield declined six basis points to 3.89%

Commodities

• West Texas Intermediate crude fell 0.3% to $72.96 a barrel
• Spot gold rose 0.2% to $2,518.54 an ounce

This story was produced with the assistance of Bloomberg Automation.

—With assistance from Rob Verdonck and Jeanny Yu.

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