Asian Stocks to Rise as US Recession Fears Fade: Markets Wrap

(Bloomberg) -- Equities in Asia were primed for gains Friday after robust US jobs and spending data eased recession concerns, fueling a rally in stocks and sending bonds tumbling.

Share futures for Australia and Hong Kong were up around 1%, and those for Tokyo’s Nikkei 225 climbed almost 3%. US contracts also edged higher in early Asia trading. The S&P 500 climbed 1.6% on Thursday, while the tech-heavy Nasdaq 100 rose 2.5%, as retail sales data beat estimates and jobless claims hit the lowest since early July.

The Wall Street gains reflect an easing of worries that the Federal Reserve has waited too long to cut rates, after underwhelming jobs data two weeks ago triggered a global equity sell-off.

The “stronger-than-expected retail sales figure quiets some of the fears the US may be slipping into a recession,” said Bret Kenwell at eToro. “Investors and consumers want inflation to go lower — but not at the expense of the economy.”

As stocks rose, US government bonds fell alongside expectations for aggressive Fed easing. Swaps market pricing now has three 25 basis point cuts priced in across the Fed’s remaining 2024 meetings, down from the four expected earlier in the week.

Treasury yields surged, with the move led by shorter maturities, while 10-year yields rose eight basis points to 3.91%. An index of dollar strength was steady after rising Thursday. The yen was also flat Friday after weakening against the greenback in the prior session to levels last seen at the start of the month. Australia’s 10-year yield rose 10 basis points in early trading Friday.

In Asia, data reports due Friday include gross-domestic product for Malaysia, Hong Kong and Taiwan, and Tertiary Industry Index data for Japan. Elsewhere, China’s central bank chief pledged further steps to support the country’s economic recovery, while cautioning that it won’t adopt “drastic” measures.

Alibaba Group Holding Ltd. will be in focus after posting an anemic 4% rise in revenue after its Chinese commerce business shrank for the first time in at least a year.

US Rally

The S&P 500 extended a six-day rally to 6.6% on Thursday — the best performance in such a span since November 2022. The Russell 2000 index of smaller firms climbed 2.5%. Wall Street’s “fear gauge” - the VIX - dropped to around 15. The rebound for US stocks from the heavy selling last week indicates trend-following quant funds may return, adding further support to stocks.

Walmart Inc. — a barometer of growth — jumped on a solid outlook. Applied Materials Inc., the largest US maker of chip-manufacturing equipment, gave a sales forecast in late US hours that met estimates.

US officials have been trying to use higher rates to ease inflation without causing the economy to contract — a scenario known as a “soft landing.” Fed Bank of St. Louis President Alberto Musalem said the time is approaching when it will be appropriate to cut rates. His Atlanta counterpart Raphael Bostic told the Financial Times he’s “open” to a reduction in September.

“A soft landing is no longer a hope. It’s becoming a reality,” said David Russell at TradeStation,. “These numbers also suggest that recent market volatility wasn’t really a growth scare. It was just normal summer seasonality amplified by moves in the currency market.”

In commodities, gold was steady early Friday at around $2,456 per ounce, while oil edged lower following Thursday’s gains.

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.