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By Bloomberg

Chinese stocks rebounded from the biggest two-day loss in 18 months, while a stronger yen sent Japanese equities lower for the first time in five days. The yuan gained the most in nine months.

The Shanghai Composite Index rallied 2.1 percent to 3,035.99 at 1:19 p.m. local time, led by construction companies. The yuan climbed 0.35 percent against the dollar, the most since March 24. Japan’s Topix dropped 0.4 percent, while the Japanese currency appreciated for a second day, adding 0.3 percent to 120.13. Japanese 10-year bond yields dropped to a record low. Copper and rubber prices declined in Asia.

“Some investors are bottom-fishing after the pretty big correction over the past few days,” said Wu Kan, a fund manager at Dragon Life Insurance Co. in Shanghai. “Machinery companies are the favorite ones for investors now as the government looks like it’s starting to implement specific policies for Chinese companies to go overseas.”

China’s stocks resumed their world-beating rally over the past month, while other Asian bourses that didn’t shut for the Christmas holiday fell. Stock gauges in Taiwan, Thailand and Vietnam slid at least 0.2 percent. The MSCI Asia Pacific Index was little changed, tracking U.S. and European stock markets.

Rubber for June delivery on the Tokyo Commodity Exchange fell 0.3 percent to extend yesterday’s 2.3 percent plunge. Copper futures in Shanghai slipped 0.2 percent, while rebar futures lost 0.6 percent after the spot price plunged to a 10- year low. Oil dropped yesterday as a report showed U.S. crude inventories increased the most in two months.

China Rally

The Shanghai Composite rose the most in two weeks after losing 5 percent over the past two days on speculation the government will take action to cool rapid gains in equity prices.

Sany Heavy Industry Co. and Zoomlion Heavy Industry Science and Technology Co. rallied 10 percent. The State Council pledged to guarantee financing for exports of “large-scale entire sets of equipment” and encourage lending by commercial banks for large equipment design and manufacturing, according to a government statement yesterday.

China Construction Bank Corp. led gains for lenders, rising 4.2 percent. China Business News reported that the central bank won’t require banks to set aside reserves for deposits from non- bank financial institutions. The yuan climbed after the central bank raised the daily reference rate by 0.06 percent to 6.1213 per dollar, the strongest in a week.

Yen Rebound

The Shanghai gauge has rallied 19 percent over the past month, the most among major global indexes tracked by Bloomberg, amid speculation the central bank will further ease monetary policy to support economic growth after lowering interest rates for the first time in two years last month.

The Nikkei 225 Index dropped 0.5 percent to 17,774.49, dragged down by losses for automakers and airlines. Toyota Motor Corp. slid 0.7 percent. Japan Airlines Co. slumped 3.9 percent after the Nikkei reported the government plans to eliminate a program under which the carrier currently pays no corporate tax.

Takata Corp. climbed 1.7 percent. The company said Chairman Shigehisa Takada will replace Swiss national Stefan Stocker as president, 18 months after appointing him to strengthen management amid a mounting recall crisis involving its faulty air bags.

Yields Drop

Japan’s benchmark 10-year bond yield declined to as low as 0.315 percent, matching the record low set in April 2013. The yen advanced against the dollar amid speculation its recent drop was too rapid. The currency has weakened more than 10 percent this year.

Prime Minister Shinzo Abe vowed to push ahead on the biggest reforms since the World War II after being selected by parliament as prime minister following his election victory, and naming his cabinet with only one change. Japan will put together economic stimulus this week, he said yesterday.

“The markets are obviously in a holiday mode and getting static,” said Takahiro Nakano, a Tokyo-based senior strategist at Mizuho Trust & Banking Co. “I don’t expect a big move in currencies beyond position adjustment.”

Financial markets in Australia, Hong Kong, India, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea and Sri Lanka were closed today.

Taiwan’s Taiex index slipped 0.2 percent, while Vietnam’s benchmark gauge lost 0.6 percent. Thailand’s SET index slid 0.8 percent as PTT Exploration & Production PCL slumped 2.5 percent on lower oil prices. WTI crude fell 2.4 percent to $55.84 a barrel yesterday after a government report showed inventories unexpectedly rose last week.

U.S. Stocks

In the U.S., the Standard & Poor’s 500 Index fell less than one point, erasing an earlier gain of as much as 0.3 percent in the last minutes of a holiday-shortened session. the Dow Jones Industrial Average rose less than 0.1 percent to 18,030.21. Treasuries pared losses after a note sales attracted foreign buyers.

The Dow and S&P 500 closed at all-time highs this week after the biggest five-day rally since 2011. The S&P 500 is up 0.7 percent in December and has climbed 13 percent for the year.

Data indicated U.S. jobless claims dropped by 9,000 to 280,000 in the week ended Dec. 20, the fewest since early November. That came after a report showed the U.S. annualized growth rate was revised up from a previous estimate of 3.9 percent, for the biggest advance since the third quarter of 2003.