Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Asia stocks get China trade relief, U.S. bonds face debt deluge

Published 05/06/2020, 08:03 PM
Updated 05/07/2020, 01:45 AM
© Reuters. Pedestrian wearing a face mask rides an escalator near an overpass with an electronic board showing stock information in Shanghai
EUR/USD
-
EUR/JPY
-
UK100
-
US500
-
DJI
-
JP225
-
DBKGn
-
SPY
-
LCO
-
UK100
-
ESH25
-
CL
-
EU50
-
IXIC
-
MSCI
-
US30YT=X
-
KS11
-
USO
-
MIAPJ0000PUS
-
CSI300
-
ILS/UAH
-

By Wayne Cole

SYDNEY (Reuters) - Asian shares pared early losses on Thursday after Chinese exports proved far stronger than even bulls had imagined, while U.S. bond investors were still daunted by the staggering amount of new debt set to be sold in coming weeks.

Beijing reported exports rose 3.5% in April on a year earlier, completely confounding expectations of a 15.1% fall and outweighing a 14.2% drop in imports.

The surprise stoked speculation the Asian giant could recover from its coronavirus lockdown quicker than first thought and support global growth in the process.

The news helped some regional markets steady after a shaky start with both Japan's Nikkei (N225) and South Korea (KS11) back to flat.

MSCI (NYSE:MSCI)'s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) eased 0.4%, led by a 0.3% dip in Chinese blue chips (CSI300).

E-Mini futures for the S&P 500 (ESc1) fared better with a bounce of 0.5%, while EUROSTOXX 50 futures (STXEc1) and FTSE futures (FFIc1) both firmed 0.2%.

Markets had started cautiously with renewed Sino-U.S. tensions lurking in the background.

U.S. President Donald Trump said he would be able to report in about a week or two whether China is meeting its obligations under a trade deal, as Washington weighed punitive action against Beijing over its handling of the coronavirus outbreak.

The flow of economic data also remained grim, with U.S. private employers laying off 20 million workers in April.

Figures due later on Thursday are forecast to show initial jobless claims rose a further 3 million last week, while Friday's payrolls report is expected to see 22 million jobs lost and unemployment hit 16% or higher.

On Wall Street, energy and utility sectors were the main losers while demand for techs kept the Nasdaq in the black.

The Dow (DJI) had ended down 0.91% and the S&P 500 (SPX) 0.70%, while the Nasdaq (IXIC) added 0.51%.

WORLD'S BIGGEST BORROWER

Bond markets saw one of the largest shifts in a while after the U.S. Treasury said it would borrow an astonishing $2.999 trillion during the June quarter, five times larger than the previous single-quarter record.

It will sell $96 billion next week alone and a surprising amount of that will be at longer tenors, which in turn pushed up long-term yields and steepened the curve.

Yields on 30-year bonds (US30YT=RR) jumped 7 basis points to 1.40%, the largest daily increase since mid-March.

That rise gave a lift to the U.S. dollar on most currencies and its index firmed to 100.192 (=USD). The euro eased to $1.0800 (EUR=), hurt in part by a gloomy economic outlook from the European Commission.

Indeed, the single currency sank to its lowest against the Japanese yen since late 2016 at 114.40 (EURJPY=), and even the dollar touched a seven-week trough at 105.98 yen .

"There's a lot to like about the yen these days," said Deutsche Bank (DE:DBKGn)'s global head of G10 FX Alan Ruskin.

He noted that with rates across the globe falling to all time lows, the yen no longer had a large yield disadvantage.

"Across all of 3m, 2y, 5y and long-end tenors, the average spread between yen rates and the average of G10 yields are at lows not seen for at least the last three decades," he said.

The yen was also cheap by many measures, he argued, with fair value put at around 85 per dollar.

In commodity markets, gold eased on expectations that supplies will grow as bullion refineries resume operations. The metal was last up 0.3% at $1,691.54 an ounce .

Oil prices inched higher after a six-session streak of gains which saw Brent almost double since hitting a 21-year low in April.

© Reuters. Pedestrian wearing a face mask rides an escalator near an overpass with an electronic board showing stock information in Shanghai

Brent crude (LCOc1) futures were last up 21 cents at $29.93 a barrel, while U.S. crude (CLc1) rose 12 cents to $24.11.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.