China Shares Gain on Spending Program; Crude Jumps

Chinese equities rose as optimism over infrastructure spending offset concerns over the strength of the global economy, while oil surged on expectations for a supply cut.

China shares trading in Hong Kong advanced to the highest level since March. Tokyo shares pared losses as the yen erased an earlier gain. Oil jumped as heads of energy ministries from Saudi Arabia and Russia said an OPEC deal should be extended. Australian government bonds rose for a fourth day, while gold extended a two-day increase.

President Xi Jinping laid out a sweeping framework for Chinese-style globalization, pledging $78 billion in financing. Equities slightly pared gains after data showed China factory output and investment slowed in April. Those reports were the latest after numbers on American retail sales and inflation suggested expectations for global growth may have run too high. North Korea fired a ballistic missile early Sunday, its seventh such test this year.

“The One Belt One Road plan is still at a very premature stage,” Raymond Yeung, chief economist for greater China at Australia & New Zealand Banking Group, told Bloomberg TV in Hong Kong. “But domestically we’ve seen China increasingly shifting back to the original investment-led model, which means they will continue to boost the economy through infrastructure spending. Infrastructure investment will continue to boom.”

The Federal Reserve remains on track to lift interest rates again next month with jobless claims at a 28-year low and the unemployment rate down to 4.4 percent. Still, the odds have fallen to about 70 percent amid evidence the U.S. inflation outlook may be waning.

German Chancellor Angela Merkel’s party won an election in the country’s most populous state on Sunday, highlighting her backing among voters ahead of the national election in September, as she stands up for free trade, vows to hold the European Union together and fends off U.S. President Donald Trump’s attacks in a conflict over defense spending.

Here’s what investors will be watching out for this week:

• India’s trade balance is due along with an Australian jobs report, Singapore exports and Malaysia CPI — all for April. Bank Indonesia will meet, and is expected to keep rates on hold.
• In Japan, GDP for the first quarter will be the focus, with growth expected to have accelerated.
• Thailand, Malaysia and the Philippines will also publish first-quarter GDP figures.
• The most important U.S. data point will be industrial production, which will provide useful insight into how the factory sector is performing, particularly now that auto sales appear to have peaked for the cycle.
• U.K. inflation figures are due Tuesday, followed by a labor market report the following day.

Here are the main moves in markets:

Stocks

• The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong rose 1.2 percent, climbing for a sixth day, as of 11:55 a.m. in Hong Kong. The Shanghai Composite Index rose 0.3 percent and the Hang Seng Index advanced 0.5 percent.
• Japan’s Topix index lost 0.2 percent, after dropping as much as 0.6 percent earlier. Australia’s S&P/ASX 200 Index fell 0.1 percent. New Zealand’s S&P/NZX 50 Index declined 0.3 percent.
• Singapore’s Straits Times Index rose 0.4 percent, South Korea’s Kospi added 0.2 percent and Taiwan’s Taiex increased 0.3 percent, extending a 17-year high.
• Futures on the S&P 500 Index rose 0.1 percent after the underlying gauge ended last week down 0.4 percent, its first weekly loss since mid-April.

Commodities

• Oil jumped 1.4 percent to $48.51 a barrel, after climbing 3.5 percent last week.
  Saudi Arabia and Russia said they favor extending oil-output cuts by global producers through the end of the first quarter of 2018 to shrink a market glut.
• Gold rose 0.2 percent to $1,230.39 an ounce, extending gains to a third day.

Currencies 

• The yen was little changed at 113.37 per dollar. The Bloomberg Dollar Spot Index was flat after falling 0.4 percent Friday.
• The Australian dollar rose 0.1 percent, trimming an earlier gain of 0.2 percent.

Bonds

• The yield on 10-year Treasury notes was flat at 2.33 percent, after dropping six basis points Friday when the weaker-than-expected CPI report buoyed bond prices.
• Yields on Australian government bonds with a similar maturity lost five basis points to 2.58 percent.