Stocks, Yuan Up as Traders Weigh Biden-Xi Summit: Markets Wrap

(Bloomberg) -- Most Asian stocks rose Tuesday and the yuan climbed as traders weighed the outcome of the first face-to-face virtual summit between U.S. President Joe Biden and Chinese leader Xi Jinping. Treasury yields dipped.

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MSCI Inc.’s Asia-Pacific share gauge advanced for a fourth session, while U.S. and European equity futures fluctuated after the S&P 500 and Nasdaq 100 ended flat. The Asian equity gains were led by Hong Kong, which was buoyed by a rally in Macau casino operators, while Japanese shares edged up.

Biden and Xi spoke of the need for cooperation, with both sides aiming to stabilize U.S.-China ties while downplaying expectations for big breakthroughs. The yuan approached its strongest level since 2018 on hopes of easing tensions.

The dollar fell and the 10-year U.S. Treasury yield was around 1.60%. Bonds retreated in the U.S. on speculation the Federal Reserve may have to speed up policy tightening to fight price pressures. Stronger-than-expected New York manufacturing data added to the case for an earlier interest-rate liftoff.

Markets continue to evaluate the risk that policy makers are erring by treating elevated price pressures as transitory. Ex-New York Fed leader William Dudley and former Richmond President Jeffrey Lacker suggested that the Fed should accelerate tapering. Bank of England Governor Andrew Bailey said he’s “very uneasy about the inflation situation.”

“We do still see quite an accommodative fiscal and monetary policy continuing throughout 2022,” Sarah Shaw, chief investment officer at boutique asset manager 4D Infrastructure, said in a briefing. “Of course, should inflation prove to be more permanent or higher than expected, then central bank action is inevitable.”

Retail Sales

This week’s focus will be on the consumer strength, with Tuesday’s U.S. retail sales data poised to show an acceleration and industry giants such as Walmart Inc. and Home Depot Inc. announcing their quarterly results.

Meanwhile, there are more signs that an announcement about Biden’s pick to head the Federal Reserve is due soon. Both current Chair Jerome Powell and Fed Governor Lael Brainard have been interviewed for the top job.

Elsewhere, Elon Musk exercised options and sold more Tesla Inc. shares, continuing a streak of sales that helped tank the stock.

Oil rose as investors wait to see if the Biden administration will tap crude reserves. Gold pushed higher, while Bitcoin slipped to trade around $61,000.

What to watch this week:

• Fed Presidents Thomas Barkin, Esther George, Raphael Bostic, Patrick Harker speak at various events. Tuesday

• Reserve Bank of Australia Governor Philip Lowe delivers a speech. Tuesday

• U.S. retail sales are poised to show an acceleration in October as consumer demand remains resilient. Tuesday

• Euro region CPI. Wednesday

• U.S. housing starts. Wednesday

• Conference Board U.S. leading index, initial jobless claims. Thursday

• Fed’s Richard Clarida and Mary Daly speak at Asia Economic Policy Conference. Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 2:11 p.m. in Tokyo. The S&P 500 was little changed

• Nasdaq 100 futures were steady. The Nasdaq 100 was little changed

• Japan’s Topix index rose 0.2%

• Australia’s S&P/ASX 200 Index fell 0.7%

• South Korea’s Kospi added 0.2%

• Hong Kong’s Hang Seng Index rose 1.2%

• China’s Shanghai Composite Index added 0.3%

• Euro Stoxx 50 futures rose 0.1%

Currencies

• The Japanese yen traded at 114.15 per dollar

• The offshore yuan was at 6.3689 per dollar, up 0.2%

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro was at $1.1381

Bonds

• The yield on 10-year Treasuries was at 1.60%

• Australia’s 10-year bond yield climbed six basis points to 1.83%

Commodities

• West Texas Intermediate crude was at $81.42 a barrel, up 0.7%

• Gold was at $1,866.56 an ounce, up 0.2%

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