NIKKEI ADVANCED, DOW JONE REBOUND AND SANGHAI COMPOSITE HOLD STEADY
US stocks traded higher on Friday, with the Dow Jones rebounding 0.5% after three consecutive sessions of losses boosted by gains in Johnson & Johnson. At the same time, S&P rose 0.7% and the Nasdaq Composite was 1.0% up, extending last session gains as technology and communication shares traded higher. On the corporate front, the healthcare giant J&J booked gains after announcing it is splitting into two publicly traded companies. Meantime, Tesla shares drifted lower after Elon Musk sold more shares worth $700 million. On the data front, consumer sentiment in the US fell in early November to its lowest level in a decade while employment vacancies dropped to 10.438 million in September. Still, all three averages snapped a five-week winning streak at the end of the second week of November, as markets assess how surprisingly elevated price levels could impact the Fed's rate hike plans.
Meanwhile, US 10-year Treasury yields were around 1.57% on Friday as the market reopens following the Veterans Day holiday the day before, while investors continue to digest prospects that inflation will stay high for longer than expected which could force the Fed to tighten soon. Meanwhile, five-year yields climbed to 1.26% and a gauge of the yield curve flattened to the least since March 2020.
The Shanghai Composite Index gained 0.18% to close at 3,539 while the Shenzhen Component Index inched up 0.04% to 14,705 on Friday, as concerns over surging prices dwindled amid rising speculations of a peak in global inflation rates. Both indices closed at least 1% higher for the week. Global equities initially sold off on news that China and Japan’s producer prices accelerated to multi-decade highs amid rising raw materials prices and supply chain disruptions, while consumer prices in the US registered at 3-decade highs driven in large part by higher energy costs. Meanwhile, high-end equipment manufacturers and technology stocks lifted the market, led by gains from Jiangsu Zhongtian (10%), Gotion High-Tech (8%), Jolywood (13%), Navinfo (10%) and East Group (20%). While China's largest chipmaker SMIC plunged 4% after its vice-chairman resigned in a leadership reshuffle. Meanwhile, China 10Y Bond Yield was 2.94 percent on Friday November 12, according to over-the-counter interbank yield quotes for this government bond maturity.
The Nikkei 225 Index advanced 1.13% to close at 29,609 while the broader Topix Index gained 1.31% to 2,041 on Friday, as Japanese technology stocks tracked Wall Street peers higher and investors shrugged off global inflation concerns amid positive corporate outlooks. Both indices closed flat for the week. Japanese technology firms, auto manufacturers and shipping giants supported the market rally, led by gains from SoftBank Group (2.58%), Lasertec (4.34%), Toyota Motor (2.39%), Nippon Yusen (1.44%), Asterisk Inc (17.58%), Recruit Holdings (2.18%), Mitsubishi Corp (1.64%) and Kawasaki Kisen (2.5%).
The yield on the benchmark Japan 10-year JGB rebounded towards 0.075%, after sliding more than 40% to a one-month low of 0.057% in the first week of November, in the aftermath of a global rout in bond markets led by US Treasuries. The latest inflation reading in the US revealed consumer prices rose at the fastest pace in over 30 years and strengthened the case that central banks are behind the curve, meaning the US Fed and other central banks will likely bring forward interest rate hikes. Accordingly, the spread between US 10Y Treasury bonds yields and 10Y JGB yields widened by more than 10bps, mainly because the Bank of Japan is expected to announce rate hikes much later than its American counterpart because the Japanese economy hasn’t been faced with wage pressures and consumer prices have barely risen on an annual basis.
