S&P 500 flirts with fresh record high, but chip-led softness weighs
* Chinese PMI data helps stocks edge higher
* Caution holds gold near 8yr top, supports yen
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
By Shriya Ramakrishnan
July 1 (Reuters) - Asian stock markets struggled to make
headway on Wednesday, while safe havens such as gold and the
Japanese yen firmed as surging coronavirus infections in the
United States took some of the shine off better-than-expected
factory activity in China.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS inched 0.2% higher, led by a 0.8% rise in
Chinese blue chips .CSI300 . But Japan's Nikkei .N225 fell
0.8%.
S&P 500 futures ESc1 fell 0.5% and European futures were
slightly negative.
Sentiment had been boosted by signs that China's factories
are slowly gathering steam, with the Caixin/Markit manufacturing
PMI rising to 51.2, compared with expectations for 50.5.
That followed firm U.S. housing data earlier this week. But
it was accompanied by a surge in U.S. virus cases, a survey
showing Japanese business mood souring and fears of growing
Sino-U.S. tension over China's crackdown in Hong Kong.
Hong Kong police said they arrested a man holding a
pro-independence flag in the first apparent use of new security
laws that were imposed by China on its freest city late on
Tuesday evening.
Hong Kong markets were closed for a holiday on Wednesday to
mark the anniversary of the former British colony's return to
China in 1997.
Meanwhile, the United States recorded its biggest single-day
spike since the pandemic began. The surge has prompted California, Texas and Florida to shut
recently re-opened bars in the last few days, while Australia
has locked-down parts of its second-biggest city, Melbourne, to
try and stop a spike in cases there. Markets are looking to U.S. manufacturing activity data due
at 1400 GMT for the latest gauge of its economic recovery and
expect a rebound. U.S. non-farm payrolls data on Thursday is
also eagerly awaited and expected to show hiring.
"Things are turning up, but from very incredibly low
levels," Robert Carnell, Asia-Pacific head of research at ING
said of the recent run of better-than-expected economic data.
Equity investors' hopes for a rebound in corporate earnings
looks "highly questionable now," he said.
"The bond market is much more realistic in it's pricing of
what is going on, that we are not going to see a substantial
improvement anytime soon."
The yield on benchmark 10-year U.S. Treasuries edged higher
to 0.6709% on Wednesday, but had finished last quarter steady
while U.S. stocks had their best three months in two decades.
.N
SIMMERING TENSION
Geopolitical tensions are also rising.
Washington has already begun rolling back Hong Kong's
special status under U.S. law following Beijing's imposition of
a new security law targeting sedition and subversion.
It was used for the first time on Wednesday when police
arrested a man holding a flag advocating independence.
Further instability seems baked into Hong Kong stock prices,
with the Hang Seng .HSI left behind in last quarter's rally,
adding just 3.5% compared with a 17.6% rise in MSCI's Asia
ex-Japan index.
But the law seems to herald another round of U.S.-China
friction. Global Times editor Hu Xijin said on Twitter that
China will announce curbs on U.S. media in the country.
"It has not taken people by surprise, but it's an unwelcome
development," Imre Speizer, a foreign exchange strategist at
Westpac in Auckland, said of the Hong Kong laws.
"It's one of a number of geopolitical factors which is a
negative for some asset classes now."
Currency markets shifted to a risk-off mood, with the
trade-sensitive Australian dollar slipping and the yen gaining.
The yen rose 0.3% to 107.61 per dollar while the Aussie fell
0.2% to dip below 69 cents to $0.6890.
In commodity markets, gold XAU= hovered near an 8-year
high at $1783.62 an ounce. Brent crude LCOc1 rose 41 cents or
1% to $41.68 a barrel, while U.S. crude CLc1 was up 1.2% at
$39.74 a barrel.
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