(ATF) Hong Kong: Risk assets were on the defensive after a spike in infections in some of the biggest European countries stoked economic worries and amid fading hopes of a stimulus in the world’s biggest economy.
“As Covid-19's third wave is beginning to take hold of the US, Americans need stimulus more than ever, a disappointing labour report could light a fire under policymakers,” BCA Research analyst Mathieu Savary said.
“On the surface it looked encouraging, however the growing number of permanent job losses is a worrying threat to the economic recovery. We will continue to closely monitor permanent job losses,” he said referring to this month’s non-farm payroll report and jobless claims that increased slightly to 870,000 last week from 866,000 a week earlier, according to Thursday’s Labor Department report.
Looking ahead, Democrats in the US House of Representatives are working on a $2.2 trillion coronavirus stimulus package that could be voted on next week.
The yuan advanced after Chinese government bonds were included in the widely tracked World Government Bond Index. The currency rose 0.2% to 6.81 per dollar on expectations of strong inflows from passive funds tracking the index.
Infections in European countries are spiking after successfully slowing outbreaks early in the year.
Meanwhile, Australia’s ASX 200 surged 1.51% to outperform the region as hopes of a central bank rate cut buoyed sentiment.
Japan’s Nikkei 225 advanced 0.51% and China’s mainland benchmark the CSI 300 inched up 0.15%.
But Hong Kong’s Hang Seng index dipped 0.32%, weighed down by the property sector. The Hang Seng property index declined 1.04%, underperforming the broad market amid worries about a default in China’s most indebted property developer Evergrande, which is also the country’s second biggest property company.
“The economic outlook remains pretty bleak, so we think the RBA will need to unleash more stimulus before long,” Ben Udy, Australia & New Zealand Economist at Capital Economics, said in reference to Australia’s economic prospects.
“Indeed, we now expect the RBA to cut the cash rate target, the target for three-year bond yields, and the interest rate on the Term Funding Facility to 0.1% at the Bank's next meeting in October.”
The US dollar strengthened against a basket of currencies adding 0.2% to 94.51 and putting further pressure on the price of gold, which fell 0.6% to $1,856 per ounce.
US Treasuries were well bid in the risk averse environment with the 10-year yield dipping a basis point at 0.66%.
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Foreign Exchange: Evergrande's monster debt weighs down China stocks, yuan
· Japan’s Nikkei 225 index advanced 0.51%
· Australia’s S&P ASX 200 jumped 1.51%
· Hong Kong’s Hang Seng index edged down 0.32%
· China’s CSI300 inched up 0.15%
· The MSCI Asia Pacific index climbed 0.68%.
Stock of the day
China Evergrande stocks and bonds were hammered after reports emerged the company had made a plea to the government top expedite a restructuring request. The plea considered the warning that delays could result in a debt default. The company denied having made such a request but stock price fell as much as 14.5% on Friday and bonds tanked by 7-9 points following these reports.