Global Markets Begin 2nd Half of Year With a Whimper

By Ese Erheriene Features Dow Jones Newswires

Stocks in Asia were looking for direction Monday, as global investors held back on making decisive bets in the absence of major data and a firm lead from the U.S.

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As the second half of the trading year got under way, market participants turned their attention to China's debt and currency markets as the so-called Bond Connect link-- a program allowing foreign investors to buy into the world's third-biggest bond market via Hong Kong--went live.

The Nikkei Stock Average was 0.2% higher in afternoon trading, rebounding from a near-1% drop Friday as the yen softened. South Korea's Kospi, which logged the largest quarterly percentage gain since 2009 in the latest quarter, was off 0.2%. Singapore's Strait Times was up 0.1%, while Australia's S&P/ASX 200 was down 0.3% and the Taiex in Taiwan fell 0.2%.

"We have some positive leads coming from last Friday because we had some risk off [sentiment] and a slight reversal in U.S. markets means that markets are still broadly supported," said Jingyi Pan, a market strategist at IG Group.

In the U.S. on Friday, the Dow Jones Industrial Average closed 0.3% higher, the S&P 500 climbed 0.2% and the Nasdaq Composite slipped 0.1%.

Still, there wasn't a lot of data on the calendar to drive movement and Asian markets were likely to consolidate for much of the week, Ms. Pan said.

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Gains in Japan's market come as business confidence among the nation's large manufacturers strengthened to its highest level in more than three years in the second quarter, according to a central bank survey, as a pickup in the global economy and renewed strength in stocks brightened the outlook for corporate Japan.

The main index measuring large manufacturers' confidence rose to plus 17 in the April-June period from plus 12 previously, according to the Bank of Japan's quarterly tankan survey.

Embattled chip company Toshiba skidded to session lows in afternoon trading after The Wall Street Journal reported that a plan for the sale of the Japanese company's semiconductor unit includes an option for South Korean chip maker SK Hynix to eventually take a minority stake in the business, contradicting Toshiba's public statements.

SK Hynix's potential partial ownership of Toshiba's chip business could lead to increased opposition from U.S.-based Western Digital, which currently has a stake in Toshiba's semiconductor operations and competes with SK Hynix, a South Korean chip maker. Toshiba's shares were last down 3%, as were shares of Seoul-listed SK Hynix.

In China, markets had a muted reaction to yet another strong reading of manufacturing data for June. The Caixin manufacturing purchasing managers index for June, released Monday, came in at 50.4 versus 49.6 in May. A level above 50 indicates economic expansion. This followed stronger-than-expected official PMI data last week. The Shanghai Composite was flat in the morning session, while the main Shenzhen board rose 0.3%.

The newly opened bond-trading link between Hong Kong and mainland China could result in an initial capital inflow of up to $250 billion, according to Ping An Asset Management.

"For foreign investors wishing to access the Chinese market, the Bond Connect would be a more attractive option than the current practice of accessing the interbank bond market--in terms of limits in quota, convenience in trading and criteria in clearing," said Zhang Dong, vice president of Ping An Securities, adding that he sees "an immense growth opportunity."

Still, that would be only a fraction of the country's $9 trillion bond market. Goldman Sachs recently said that as of the end of March, the total amount of Chinese domestic bonds held by foreign investors was around 830 billion yuan ($122 billion).

The Chinese currency held steady against the U.S. dollar after the People's Bank of China fixed the yuan near its highest level against the dollar since November. The central bank Monday set the dollar's midpoint for daily trading at 6.7772 yuan compared with 6.7744 on Friday.

In Hong Kong, after the best first-half performance since 2009, traders said they expect momentum to ease this month. The Hang Seng Index in Hong Kong was up 0.1% at the midday break. Among major locally listed stocks, Macau casino operators underperformed after gambling revenue gained 26% from a year ago, compared with analysts' expectations of more than 30%. Wynn Macau and Galaxy Entertainment dropped 3.5% and 3.2%, respectively.

Oil prices were higher in Asian trading. Prices were supported by the first net decline in active U.S. oil-drilling rigs since January last week.

"One report doesn't start a trend but signals apprehension by oil companies as profit margins diminish," said Stuart Ive, a client adviser at OM Financial.

Gains could be capped Monday by reports that Libya's daily oil production has topped one million barrels. August WTI, the oil-price benchmark in the U.S., was recently up 0.4% at $46.21 a barrel, while Brent, the global benchmark, added 0.2% to $48.88.

John Wu, Jenny W. Hsu and Megumi Fujikawa contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

Global stocks started the second half of the year slightly firmer as investors focused on fresh readings on the health of manufacturers.

The Stoxx Europe 600 was up 0.7% shortly after markets opened, on track to snap a four-session losing streak. Asian markets mostly closed a touch higher, while Wall Street was poised to open up 0.3% after the S&P 500 and Dow Jones Industrial Average both closed out their seventh consecutive quarters of gains.

Oil-and-gas companies led advances in Europe on Monday, tracking a rise in oil prices after local markets closed Friday. Brent crude was last up 0.5% at $49 a barrel after closing out its worst quarter since 2015. Shares of France's Total SA were up 1.3% after it said it would sign a deal that completes a $1 billion investment in a giant Iranian gas field.

Banks and mining companies also advanced across Europe ahead of fresh readings on euro-area employment and manufacturing data later Monday. Trading volumes are expected to be lower at the start of the week ahead of the July 4 holiday in the U.S.

In government bonds, German 10-year yields cooled to 0.462% from 0.472% Friday after ECB executive board member Yves Mersch said Sunday that the European Central Bank hasn't yet done enough to create a sustained economic recovery in the eurozone.

U.S. 10-year Treasury yields edged up to 2.313% from 2.298% on Friday while two-year yields rose to 1.388% from 1.385%, their highest since 2009.

The euro fell 0.2% to $1.1402 while the wider WSJ Dollar Index edged up 0.2%.

Earlier, stocks in Asia mostly inched a touch higher Monday, as investors held back on making decisive bets in the absence of major data and a firm lead from the U.S.

Market participants turned their attention to China's debt and currency markets as the so-called Bond Connect link-- a program allowing foreign investors to buy into the world's third-biggest bond market via Hong Kong--went live.

China's bond market showed little reaction but the newly opened bond-trading link between Hong Kong and mainland China could result in an initial capital inflow of up to $250 billion, according to Ping An Asset Management.

"For foreign investors wishing to access the Chinese market, the Bond Connect would be a more attractive option than the current practice of accessing the interbank bond market--in terms of limits in quota, convenience in trading and criteria in clearing," said Zhang Dong, vice president of Ping An Securities, adding that he sees "an immense growth opportunity."

Still, that would be only a fraction of the country's $9 trillion bond market. Goldman Sachs recently said that as of the end of March, the total amount of Chinese domestic bonds held by foreign investors was around 830 billion yuan ($122 billion).

The Chinese currency held steady against the U.S. dollar after the People's Bank of China fixed the yuan near its highest level against the dollar since November.

The Shanghai Composite was flat despite a strong reading of manufacturing data for June. The Caixin manufacturing purchasing managers index for June, released Monday, came in at 50.4 versus 49.6 in May.

Elsewhere, Japan's Nikkei Stock Average was 0.1% higher as a central bank survey showed b usiness confidence among the nation's large manufacturers strengthened to its highest level in more than three years in the second quarter.

Chip company Toshiba fell in afternoon trading after The Wall Street Journal reported that a plan for the sale of the Japanese company's semiconductor unit includes an option for South Korean chip maker SK Hynix to eventually take a minority stake in the business, contradicting Toshiba's public statements. SK Hynix's potential partial ownership of Toshiba's chip business could lead to increased opposition from U.S.-based Western Digital.

In Hong Kong, the Hang Seng was up 0.2% after its best first-half performance since 2009. Macau casino operators underperformed after gambling revenue gained 26% from a year ago, compared with analysts' expectations of more than 30%.

Australia's S&P ASX 200 fell 0.7%, the only major index to decline.

John Wu

, Shen Hong and Megumi Fujikawa contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

July 03, 2017 03:53 ET (07:53 GMT)