Asian equities rise on Wall Street's rally

Caixin China PMI shows mixed results, Australian Dollar rebounds ahead of RBA decision

By Ahmed Azzam | @3zzamous | 3 July 2023

  • Asian equities gain momentum following Wall Street's rally

  • Japan's manufacturing confidence improves, driving market gains

  • Caixin PMI shows a slight decline but remains above market consensus

  • Australian dollar rebounds as investors anticipate RBA's policy decision

  • US futures hold steady ahead of US independence holiday

Asian equities advanced today, taking cues from the positive momentum on Wall Street. Japan led the gains after the Bank of Japan's (BOJ) Tankan survey revealed a notable improvement in confidence among large manufacturers, marking the first positive shift in nearly two years. US futures, however, remained relatively unchanged ahead of a shorter trading session in anticipation of the July 4 holiday. In Europe, contracts also saw gains, while Treasuries remained steady and Brent crude edged higher.

Caixin China General Manufacturing PMI shows mixed results

The Caixin China General Manufacturing Purchasing Managers' Index (PMI) for June 2023 registered at 50.5, slightly down from May's reading of 50.9, but still above the market consensus of 50.2. While this marks the second consecutive month of factory activity expansion, the pace of growth in output notably slowed compared to May's 11-month high. Additionally, new orders also moderated, reflecting a decline in sentiment to an eight-month low.

Australian Dollar rebounds ahead of RBA policy decision

The Australian dollar climbed above $0.665, extending its recovery from near one-month lows, as investors prepared for the Reserve Bank of Australia's (RBA) policy decision. Market sentiment remains divided on whether the central bank will opt to raise interest rates again or choose to pause. Supporting the Aussie's upward movement were positive indicators, including a robust rebound in building approvals, improvements in housing finance, and a sustained increase in housing prices. These factors suggest that financial conditions may be tightened further. Notably, the RBA surprised markets last month with a 25 basis point rate hike, bringing the total increase to 400 basis points and setting borrowing costs at an 11-year high of 4.1%. However, the central bank's latest policy meeting minutes indicated a more balanced approach, dampening expectations of further tightening in the near term.