Asia stocks grind higher as focus turns to earnings

The Chinese yuan rose to a four-month high of 6.9872 per US dollar.
The Chinese yuan rose to a four-month high of 6.9872 per US dollar.PHOTO: AFP

SINGAPORE (REUTERS) - Asian equity markets ground higher on Thursday (July 9) as investors tried to look past gathering US-China tension and renewed coronavirus lockdowns to upcoming company earnings, hoping that global stimulus efforts will yield upbeat outlooks.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 per cent and touched a 20-week high as Chinese stocks extended their extraordinary rally.

The Shanghai Composite Index rose 1 per cent, while Hong Kong's Hang Seng index rose 0.5 per cent and Japan's Nikkei edged ahead by 0.2 per cent.

Singapore's Straits Times Index was down 0.25 per cent at 11:40am Singapore time.

The Chinese yuan rose to a four-month high of 6.9872 per US dollar and the greenback sat near a one-month low against a basket of currencies .

China was hit first and so is emerging first from the Covid-19 pandemic. In addition, fiscal stimulus, heavy government borrowing driving up bond yields, and a state-media editorial extolling strong fundamentals have stoked euphoria.

"The yuan has a perfect combination for a currency - relatively tight monetary policy; yield spreads moving in favour of the currency and equity prices also rising more than most," said Deutsche Bank's chief international strategist, Alan Ruskin.

"Even before we think of Covid-19 virus divergence indicators, there are enough money and related financial indicators consistent with a dollar/yuan below 7," he said.

China's blue-chip index rose for an eighth straight session in early trade on Thursday, gaining 0.6 per cent to touch a five-year high. The Shanghai Composite was up by the same margin and at its highest level since early 2018.

Both have added about 15 per cent this month, and the rally continued in spite of a more circumspect take in Chinese media, which carried a commentary reminding investors about the 2015 crash and suggesting a rational approach to risk-taking.

The mood lifted Australia's S&P/ASX 200 1 per cent, though New Zealand's benchmark fell nearly 2 per cent after a Rio Tinto plan to close an aluminium smelter hit energy stocks.

 
 

Restraint was more evident in other asset classes as investors kept a wary eye on surging coronavirus cases and increasing tension between China and its trading partners, while waiting for US jobs figures at 1230 GMT and next week's earnings.

US stock futures eased 0.1 per cent, following another session of gains on Wall Street overnight. The yield on benchmark US 10-year Treasuries remained under pressure at 0.6562 per cent and gold sat above US$1,800 an ounce.

EARNINGS AHEAD

The US has posted its largest number of daily new infections since the outbreak began and global tensions are on the rise.

Five million Australians are under strict stay-at-home rules in the country's second largest city of Melbourne.

And - as the West mulls over a tougher response to China's crackdown in Hong Kong - China's top diplomat said on Thursday that China-US relations face the most serious challenges since diplomatic ties were established.

That has investors hoping to hear some good news about the outlook when US earnings season begins next week.

"Earnings season is upon us, and we really want to see what it looks like," said Jun Bei Liu, a portfolio manager at Australia's Tribeca Investment Partners. The focus will be on the outlook as well as on understanding how deeply stimulus efforts have flowed through the real economy, she said.

JP Morgan, Citigroup and Wells Fargo report their results on Tuesday, and Microsoft and Netflix on Thursday.

Beyond the yuan, major currencies were mostly steady on Thursday, hanging on to overnight gains against the dollar. The Aussie held near the top of its recent range at US$0.6974 and the kiwi briefly made a one-month peak of US$0.6583.

Oil prices idled amid concerns about renewed US lockdowns. Brent crude futures was 0.1 per cent weaker at US$43.25 per barrel. US crude fell 0.3 per cent to US$40.79 per barrel.