Chinese technology shares look set to rally Wednesday as a reorganization of Alibaba provides a bright spot in Asian stocks following a decline in US equities.
(Bloomberg) — Chinese technology shares look set to rally Wednesday as a reorganization of Alibaba provides a bright spot in Asian stocks following a decline in US equities.
Futures for the Hang Seng Index rose 1.8% while Australian stocks fluctuated and those in Japan edged higher. US contracts made small gains after a downbeat session for the S&P 500 and tech-heavy Nasdaq 100 on Tuesday.
US-listed shares of Alibaba Group Holding Ltd. jumped 14% on news of an overhaul that will see China’s online commerce leader split into six business units, a major restructuring that promises to yield several initial public offerings. Shares in Japan-listed Softbank Group Corp., which owns a large stake in Alibaba, surged as much as 5.9% on Wednesday.
The Golden Dragon index of Chinese companies that trade in the US rose 3.5% Tuesday, its best day in almost two months. The advance reflected a further shift in investor attitudes to Chinese technology companies after a crackdown from Beijing on large players such as Tencent Holdings Ltd. and Baidu Inc., which also rallied in US trading.
The Australian dollar fell and stocks erased a loss after softer-than-expected inflation data. Australian bonds yields pared a morning rise after selling in Treasuries Tuesday pushed yields higher across the curve. Treasuries were little changed at the start of Asian trading after the two-year yield rose eight basis points and the 10-year equivalent climbed four basis points Tuesday.
An index of the dollar was broadly flat after ending Tuesday at the lowest level in eight weeks.
The moves come as investors prepare for a raft of data on the American economy this week, including the central bank’s preferred measure of inflation — the so-called core PCE deflator — which is likely to factor into the Federal Reserve’s next rate decision.
St. Louis Fed President James Bullard said “appropriate monetary policy can continue to put downward pressure on inflation” despite the turmoil in banking. Meanwhile, US consumers appear to have shrugged off the bank failures, with the latest consumer confidence figures unexpectedly higher in March.
Swaps traders have priced in more than a 50% probability the Fed will lift rates by a quarter point at its next meeting, with plans to ease then sharply thereafter. However, several strategists have joined BlackRock Investment Institute in saying markets are wrong in expecting imminent rate cuts.
“The banking crisis and the new tighter standards for banks is equivalent to one to two rate hikes,” said Eva Ados, chief investment strategist for ERShares, in an interview with Bloomberg Television. “There is a big possibility here of a pricing mistake. We are pricing in the rate drop rather than the reason why rates are dropping, which is the banking crisis.”
Investors were also focused on European banks after French prosecutors said lenders including Societe Generale SA and BNP Paribas SA face collective fines of more than 1 billion euros ($1.1 billion) as part of a probe into tax fraud and money laundering. An index of European banks rose Tuesday despite the news.
Elsewhere, oil was higher after a clash between Iraq and its Kurdish region curtailed exports. Gold was little changed and Bitcoin traded around $27,300.
Key events this week:
- EIA Crude Oil Inventory Report, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.3% as of 9:34 a.m. Tokyo time. The S&P 500 fell 0.2%
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 0.5%
- Hang Seng futures rose 1.8%
- Japan’s Topix rose 0.3%
- Australia’s S&P/ASX 200 was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0846
- The Japanese yen fell 0.3% to 131.25 per dollar
- The offshore yuan was little changed at 6.8802 per dollar
- The Australian dollar fell 0.2% to $0.6695
Cryptocurrencies
- Bitcoin was little changed at $27,297.07
- Ether was little changed at $1,775.58
Bonds
- The yield on 10-year Treasuries was little changed at 3.56%
- Australia’s 10-year yield advanced one basis point to 3.31%
Commodities
- West Texas Intermediate crude rose 0.9% to $73.87 a barrel
- Spot gold fell 0.1% to $1,971.33 an ounce
This story was produced with the assistance of Bloomberg Automation.
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