Weakening US inflation boosts Asia stocks

The renminbi rose to the highest level in two months on Wednesday on the back of strong economic readings out of China.

The Chinese currency rose as much as 0.2 per cent to Rmb7.2373 against the dollar following the release of official readings showing that retail sales in China rose 7.6 per cent year on year.

Although the retail sales reading was flattered by widespread economic disruption a year ago during the final months of China’s zero-Covid policy, the rise was still markedly stronger than a median forecast of 7 per cent from economists.

Even after recent gains, the renminbi remains down almost 5 per cent against the dollar this year.

Indicators: The European Commission issues forecasts for a range of economic metrics for each member state in 2024 and 2025. France publishes its monthly inflation rate. Russia releases third-quarter gross domestic product data. In the UK, inflation numbers and Office for National Statistics house price figures are expected.

Amazon: The UK’s Supreme Court will start hearing arguments over whether the sale or advertising of trademarked goods on a foreign website infringes the relevant British and EU trade marks, relating to items that appeared on the Amazon ecommerce platform.

News Corp: Rupert Murdoch steps down as chair following an annual shareholders meeting scheduled for today, becoming chair emeritus.

UK climate risk: The National Audit Office publishes a report on the country’s resilience to flood risks, following extensive damage caused by recent heavy rainfall.

Occupied Palestinian Territories: It’s independence day in the West Bank and Gaza. Celebrations are unlikely amid the Israel-Hamas conflict.

Warren Buffett’s Berkshire Hathaway slashed its positions in several blue-chip US companies in the third quarter, ploughing billions of dollars from the sprawling conglomerate’s stock portfolio into cash.

The company disclosed it had sold off its remaining position in automaker General Motors during the three months to the end of September. It exited a stake of 59,400 shares it had built in logistics company UPS, trimmed its ownership of computer and printer maker HP by 15 per cent and reduced its stock holdings in oil major Chevron by 10 per cent.

Berkshire sold out of positions in Johnson & Johnson and Procter & Gamble, stakes that were each worth around $50mn at the end of the second quarter.

Gauges of consumer and industrial activity in China grew faster than expected in October, adding to hopes of improvement across an economy where domestic demand has struggled to gain traction.

Retail sales expanded by 7.6 per cent year-on-year last month, compared to forecasts of 7 per cent in a Reuters poll of economists. Industrial production rose 4.6 per cent, marginally above expectations of a 4.4 per cent rise.

The measures benefited from comparison with a year earlier, when China was in the final stages of a three-year anti-pandemic policy that stifled economic activity.

Asian equities rose on Wednesday, as softer-than-expected US inflation data fuelled speculation that the Federal Reserve has finished raising interest rates.

Hong Kong’s Hang Seng index advanced 2.2 per cent and China’s CSI 300 index added 0.8 per cent. Japan’s Topix rose 0.8 per cent and South Korea’s Kospi climbed 2.1 per cent.

US consumer prices grew 3.2 per cent in the 12 months through October, compared with September’s 3.7 per cent jump, official figures showed on Tuesday. That represented the first decline in four months and was below expectations of 3.3 per cent.

The S&P 500 and Nasdaq Composite on Tuesday closed up 1.9 per cent and 2.4 per cent, respectively, their biggest daily gains since April.

Israeli forces entered al-Shifa hospital in Gaza on Wednesday to conduct what the military described as a “precise and targeted operation” against Hamas.

The move by Israeli troops comes days after they surrounded the largest medical complex in the besieged strip where tens of thousands of people had been sheltering from Israel’s bombardment of the coastal enclave.

Israel claims al-Shifa is a significant site for Hamas’s operations because it sits on top of the armed group’s underground infrastructure that the Israeli military intends to destroy.

The Israel Defense Forces said in a statement on X its operation in a “specified area” of the hospital was “based on intelligence information and an operational necessity”.

Japan’s economy contracted more sharply than expected in the third quarter as consumption remained weak in the face of rising imported costs and global economic uncertainty.

Weak business spending was also behind a 2.1 per cent annualised drop in gross domestic product, which was much deeper than a 0.4 per cent contraction estimated by economists polled by Bloomberg.

The latest data translated into a 0.5 per cent contraction on a quarterly basis, according to preliminary figures released by the cabinet office on Wednesday.

Analysts say the weaker-than-expected performance of the Japanese economy could complicate efforts by the Bank of Japan to gradually unwind its ultra-loose monetary policy.

Xi-Biden summit: US President Joe Biden and Chinese leader Xi Jinping are set to meet in San Francisco in an effort to stabilise relations between the two powers.

Economic data: China reports October retail sales and industrial production data, while Japan releases preliminary third-quarter economic growth figures.

Chinese companies: Ecommerce giant JD.com and tech power Tencent report earnings.

Asean: Defence ministers from the group’s member states will meet in Jakarta.

The hedge funds Millennium Management and Schonfeld Strategic Advisors have terminated talks that would have led the $60bn-in-assets firm to put billions of dollars to work with its smaller rival Schonfeld, according to people familiar with the situation. 

The two multi-strategy firms had been in negotiations for several months about a potential partnership, the Financial Times reported in October. The plan under discussion was to have Schonfeld manage money for Millennium, giving Millennium access to its more than 100 investment teams. 

However, Schonfeld has walked away from the deal after investors said they would put more money into the firm, said a person familiar with the matter. 

Millennium and Schonfeld both declined to comment.

Investors are stepping up pressure on companies to end the production and use of hazardous “forever chemicals” amid concerns over increasing litigation and regulatory scrutiny.

More than 50 investment firms representing $10tn in assets will write on Wednesday to the world’s biggest producers of perfluoroalkyl and polyfluoroalkyl substances, known as PFAS, to demand a “time-bound phaseout plan”, increased transparency on production and greater investment in safer alternatives. 

“Manufacturers and users of PFAS chemicals are exposed to deep liability and insurance risks, reminiscent of those historically linked to asbestos,” the letter states. This “could materially adversely harm the long-term value of companies involved in their manufacture and sale”, the investors say. 

Read more here.

Real estate groups led a Wall Street rally on Tuesday, following a softer than expected inflation report earlier in the day.

The S&P 500 closed 1.9 per cent higher, with the interest rate sensitive real estate sector leading the way with a 5.4 per cent advance. The SDPR S&P Homebuilders ETF gained 5.9 per cent, its best one-day rise in a year. Utilities advanced 4 per cent.

Meanwhile, the tech-heavy Nasdaq Composite gained 2.4 per cent, nothching its biggest one-day gain since April.

Treasury yields plummeted, with the yield on the rate-sensitive two-year Treasury note down 0.21 percentage points at 4.83 per cent. Bond yields rise as prices fall.

Jordan’s King Abdullah II on Tuesday called for “an end to this atrocious war” and asked for a “concerted international effort” to create a two-state solution for the Israel-Palestine conflict.

In a Washington Post op-ed, he said world leaders have a duty to end the fighting between Israel and Hamas.

“It begins by recognizing our duty not only to enforce humanitarian intervention and put an end to this atrocious war but also to admit that the current path is not a path to victory for anyone,” he said.

The king criticised Israel’s leaders, who he said have been “unwilling to take the path of peace on the basis of a two-state solution”.