Aug 04, 2022 02:26AM ET
By: AnalysisWatch
Asian stocks rose in a choppy session on Thursday as a bit of nervous tension over Nancy Pelosi's visit to Taiwan dissipated and as investors took cues from robust U.S. data and earnings.
Hong Kong tech shares led the attempted rebound with a gain of 2.8%, reeling in some of the losses suffered as Sino-U.S. frictions flared over a visit to Taipei this week by House of Representatives Speaker Pelosi, which angered China.
The Hang Seng rose 1.7%. Japan's Nikkei rose 0.7%. MSCI's broadest index of Asia-Pacific shares gained 0.5% and crude prices steadied after sliding on news of slackening demand and higher supply.
S&P 500 futures were down 0.1% in the Asian afternoon. European futures rose 0.3% and FTSE futures were flat as expectations for the steepest Bank of England rate hike in 27 years loomed over the market mood.
A 50 basis point (bps) hike is all but priced in, so sterling may struggle in the absence of a hawkish surprise -- especially as the British economic outlook is looking weak while U.S. data has offered some upside surprises.
Sterling was steady at $1.2157.
An ISM survey on Wednesday showed the U.S. services industry unexpectedly picked up in July, prompting a selloff in bonds and rallies for U.S. stocks and the dollar, with the Nasdaq up 2.5% to a three-month high
Fed officials have provided a hawkish chorus this week, battering the short end of the yield curve. Two-year Treasury yields were at 3.0815% in Asia and are up 18 bps this week. Benchmark 10-year year yields held at 2.7191%.
Currency markets have also hit an air pocket as uncertainty swirls around the outlook for growth and rates. The dollar has halted a decline that began in the middle of July, with support from both hike expectations and heightened political tension.
Fed funds futures remain priced for rate cuts to be under way by the middle of next year and the inversion of the U.S. yield curve, with 10-year yields below two-year yields, suggests investors think that the hiking path will hurt growth.
The dollar index was steady at 106.390. A euro weighed by Europe's energy crisis bought $1.0165. The Australian dollar enjoyed a small fillip from a record Australian trade surplus and rose 0.2% to $0.6968
China launched unprecedented live-fire military drills in six areas that ring Taiwan, a day after Pelosi's visit.