Shanghai fell more on Wednesday as the country’s massive property sector slump dragged it down, although Hong Kong, Tokyo, Sydney, and Mumbai all rose.
The MSCI Asia ex-Japan share index climbed 0.7% from its nine-month low reached only two trading days earlier. Utility and steel company companies helped push Japan’s Nikkei index up by 0.48 points.
While stubbornly bleak manufacturing data from Japan kept mood fragile, some investors were waiting for reports from tech favorite Nvidia to see whether the sector’s stratospheric valuations can survive a surge in bond rates.
Factory activity in Japan fell for a third consecutive month in August, according to data released on Wednesday, providing an early indicator of the state of the global manufacturing sector. On Wednesday, the United States will also release its flash PMI data, which are expected to indicate the manufacturing sector continued to shrink.
As investors saw the Bank of Japan’s decision to abstain from intervening to purchase bonds as a green signal for further selling, the benchmark 10-year Japanese government bond yield rose to a new 9-1/2 year top of 0.675%.
While Chinese blue chips lost 1.34 percent of their value from Tuesday’s high, the Hang Seng Index in Hong Kong finished the day up 0.31 percent.
Country Garden, a property developer, had its stock price fall 6.7% as it faces a serious financial problem that would result in its exclusion from the Hang Seng index beginning in early September.
On Wednesday, iron ore prices increased by 5% to a new two-year high, while coking coal and coke increased by more than 3% due to a lack of government directions in China to reduce steel output.
Three months after an election and prolonged fighting over the formation of a new government, the Stock Exchange of Thailand likewise experienced an increase of 0.2% as confidence was raised by news that the nation finally had a new prime minister.
China suspected of selling Treasuries as eyes turn to Nvidia
The financial market is anticipating Nvidia’s earnings report, which is scheduled for late Wednesday. The chipmaker’s stellar quarterly report stoked investor excitement in AI and technology, helping to boost the S&P 500 thus far in 2018.
Overnight, Nvidia stock reached a record high of $481.87, and options data shows that investors anticipate a larger-than-usual move in the stock after the quarterly earnings.
Nvidia’s sales prediction for the third quarter is anticipated by analysts to increase 110% year over year to $12.5 billion. Analyst at JPMorgan, Stuart Humphrey, said others are estimating $14-15 billion.
Humphrey added, “This kind of number feels a touch high to me, but if it sniffs this, one could argue that into this print, it doesn’t matter if demand will eventually decline next year – (it) still will be rerated higher.”
Increases in yields overnight weighed on Wall Street, sending them to new 16-year highs. The Dow Jones dropped 0.5%, while the S&P 500 dropped 0.3%, and the Nasdaq Composite gained 0.1%.
After S&P joined Moody’s in downgrading many regional US institutions, financial shares underperformed, with the S&P 500 banks falling 2.4%.
Treasuries paused from their recent decline elsewhere. In Asia, 10-year rates dropped by 2 basis points to 4.3062% after reaching a 16-year high of 4.3660% the previous day.
As investors wait for additional rate hints at the Federal Reserve’s annual conference in Jackson Hole, Wyoming later this week, a sell-off has been fueled by an increase in Treasury issuance, a rating downgrading by Fitch three weeks ago, and fears that China may dump Treasuries to protect the currency.
Insights from the Richmond Federal Reserve After strong US economic data made the “re-acceleration scenario” plausible, President Thomas Barkin has pushed for chair Jerome Powell to hammer home a hawkish message.
Currencies hardly budged in the days leading up to Jackson Hole. At 103.5 versus a group of major currencies, the US dollar was hovering at its highest point in two months.
With rumors that Japan would only interfere in the market if the yen falls below 150 to the dollar, the yen strengthened by 0.2% to 145.62 per dollar, moving farther away from a nine-month bottom of 146.56.
The cost of oil has increased somewhat. Futures contracts for Brent oil increased by 0.1% to $84.09 per barrel and for US West Texas Intermediate crude by 0.1% to $79.72.