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GLOBAL MARKETS-China bull charge drives stocks and yuan higher

Published 07/09/2020, 01:50 PM
Updated 07/09/2020, 02:00 PM
© Reuters.
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* China rally extends for eighth session, yuan soars
* Gold steady above $1,800/oz
* Investors hope for positive outlook from U.S. firms on
earnings
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook
SINGAPORE, July 9 (Reuters) - Surging Chinese stocks led
Asia's equity markets higher on Thursday, as investors looked
past Sino-U.S. tension and renewed coronavirus lockdowns and
hoped stimulus washing through the world economy finds its way
to company earnings.
Asia's investors are riding high after a front-page
editorial in Monday's China Securities Journal extolling market
fundamentals was seen as official encouragement to buy stocks.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.8% and touched a 20-week high. The
Shanghai Composite .SSEC turned in its longest winning streak
in more than two years and is up 16% in eight sessions. .SS
European futures point to gains from London to Frankfurt,
with FTSE futures FFIc1 up 0.5% and Germany's DAX futures
FDXc1 up 1.2%, while U.S. stock futures ESc1 fell 0.1%.
The yuan CNY= rose to a four-month high and the
risk-sensitive New Zealand dollar NZD=D3 hit its highest since
January. FRX/
"Broadly speaking, the Chinese economy is coping better not
only with a recovery but also in dealing with the potential of a
second wave (of infections)," said National Australia Bank FX
strategist Rodrigo Catril.
"Rightly or wrongly, that market is liking the idea that the
yuan can strengthen on the back of equity inflows."
China's factory gate prices fell for a fifth straight month
in June but signs of a pickup in some parts of the sector
suggest a slow but steady recovery remains intact. Deutsche Bank's chief international strategist, Alan Ruskin,
said the yuan enjoyed the "perfect combination" of tight
monetary policy, yield advantage and equity demand.
In any case, its rally was not to be derailed by growing
pressure from the West over China's tightening grip on Hong
Kong, nor was sentiment dented by surging U.S. virus cases and a
fresh lockdown of 5 million Australians in Melbourne.
Australia's benchmark ASX 200 index .AXJO rose 1% and
Japan's Nikkei .N225 rose 0.6%. The Australian dollar AUD=D3
rose 0.2% to $0.6995, but - perhaps indicating a cap on
exuberance - it was unable to break past resistance at $0.70.
U.S. Treasuries were not sold in to the rally either, and
nor were the safe havens of gold or the Japanese yen. The yield
on benchmark U.S. 10-year Treasuries US10YT=RR remained under
pressure at 0.6545% and gold XAU= sat at $1,810.73 an ounce.

EARNINGS AHEAD
The U.S. earnings season looms with investor hopes high but
warning signals flashing.
Federal Reserve officials raised fresh doubts on Wednesday
about the durability of the rebound. The United States has also posted its largest number of
daily new infections since the outbreak began and global
tensions are on the rise. Australia on Thursday suspended an extradition agreement
with Hong Kong and urged its citizens to reconsider the need to
remain there if they are concerned about new national security
laws that extend Beijing's power in the city.
China's top diplomat said on Thursday that China-U.S.
relations face the most serious challenges since diplomatic ties
were established. U.S. jobs data due at 1230 GMT will offer the next checkup
on the recovery's progress, followed by results next Tuesday
from J.P. Morgan JPM.N , Citigroup C.N and Wells Fargo
WFC.N ahead of Microsoft MSFT.O and Netflix NFLX.O on
Thursday.
"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.
Commodities seem to be laying a bet each way. Brent crude
LCOc1 was flat at $43.28 per barrel and U.S. crude fell 0.2%
to $40.82 per barrel as concerns about oversupply weigh. O/R
But Shanghai copper hit a 16-month high on supply worries in
top producer Chile.

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