Equity futures edged higher on speculation the Federal Reserve is nearing the end of its tightening campaign, while persisting concerns over China’s economic recovery weighed on the nation’s equities.
(Bloomberg) — Equity futures edged higher on speculation the Federal Reserve is nearing the end of its tightening campaign, while persisting concerns over China’s economic recovery weighed on the nation’s equities.
Contracts for European and US stocks held on to small gains following a jump in the S&P 500 by the most since June on Tuesday after US job openings fell by more than expected. That offered fresh evidence that labor demand is slowing in the world’s largest economy. Separate data showed consumer confidence dropped amid souring views on jobs, higher borrowing costs and lingering inflation.
Nearly 90% of the S&P 500 companies rose as the gauge closed just shy of 4,500. A rally in megacaps like Tesla Inc. and Nvidia Corp. sent the Nasdaq 100 up more than 2%.
The US economic data triggered lower wagers in swap contracts for a Fed hike in 2023, and a greater chance of a policy pivot in the first half of 2024. Traders also brought forward bets on the expected start of rate cuts to June from July of next year.
“With markets ready to pounce on softer US data, any sign of weakness is likely to weigh further on yields and the US dollar,” said Matthew Simpson, a senior market analyst at City Index. “That could be great for equity market sentiment.”
Investors will be monitoring data on US economic growth later Wednesday to further ascertain the economy’s resilience amid high interest rates. Consumer confidence from Eurozone is also due.
In Asia, the MSCI Asia Pacific Index came off its highs as the strong rally in Chinese equity markets gradually evaporated. Benchmarks had earlier rallied, with the Hang Seng Index rising as much as 1.4%, after Chinese state-owned lenders were reported to prepare to reduce rates on the majority of outstanding mortgages, as well as on deposits.
“These little piecemeal policy shifts are probably very good in the short term for sentiment, but they don’t necessarily create this sort of surge in terms of the local economy,” Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, said on Bloomberg Television. “There are still bigger issues at play here that I think are holding investors back still at this particular point.”
Australian stocks continued to outperform the region after a monthly inflation gauge eased more than expected, bolstering the case for the central bank to extend a pause in tightening at next week’s policy meeting.
Treasury yields retreated Tuesday following the jobs opening data, with the two-year yield sinking 15 basis points. They were little changed Wednesday.
A gauge of dollar strength rose and major currencies weakened against the greenback. The Hong Kong dollar is poised for its biggest monthly retreat since 1985 as interest rates in the city drop.
Elsewhere, the crypto space traded lower after Bitcoin jumped more than 6% in the previous session as a US court ruling potentially paved the way for the country’s first Bitcoin exchange-traded fund.
In commodities, West Texas Intermediate rose for a fifth day, set to match the winning streak last seen in March, on signs of tighter market. Gold steadied after rising to the highest since early August on easing Fed rate hike bets.
Key events this week:
- Eurozone economic confidence, consumer confidence, Wednesday
- US GDP, wholesale inventories, pending home sales, Wednesday
- China manufacturing PMI, non-manufacturing PMI, Thursday
- Japan industrial production, retail sales, Thursday
- Eurozone CPI, unemployment, Thursday
- ECB publishes account of July monetary policy meeting, Thursday
- US personal spending and income, initial jobless claims, Thursday
- China Caixin manufacturing PMI, Friday
- Eurozone S&P Global Eurozone Manufacturing PMI, Friday
- South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
- Boston Fed President Susan Collins speaks at virtual event, Friday
- US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.1% as of 6:47 a.m. London time. The S&P 500 rose 1.5%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 2.2%
- Japan’s Topix rose 0.4%
- Australia’s S&P/ASX 200 rose 1.2%
- Hong Kong’s Hang Seng rose 0.5%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures rose 0.3%
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.1% to $1.0867
- The Japanese yen fell 0.2% to 146.18 per dollar
- The offshore yuan fell 0.2% to 7.2983 per dollar
- The Australian dollar was little changed at $0.6479
- Bitcoin fell 0.4% to $27,457.3
- Ether fell 0.5% to $1,718.25
- The yield on 10-year Treasuries advanced two basis points to 4.14%
- Japan’s 10-year yield advanced one basis point to 0.650%
- Australia’s 10-year yield declined two basis points to 4.08%
- West Texas Intermediate crude rose 0.4% to $81.52 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.