Stocks and US equity futures rose Monday amid scaled back bets on how aggressively the Federal Reserve will hike interest rates and as investors assessed Chinese pledges to shore up economic growth.
A gauge of Asian shares added more than 1%, boosted by a jump in Chinese technology firms. S&P 500, Nasdaq 100 and European contracts pushed higher following a Wall Street rally Friday. Japan is shut for a holiday.
China’s central bank has indicated it will step up implementation of prudent monetary policy. Its banking regulator has asked lenders to provide credit to eligible developers so they can complete unfinished residential properties. China faces rising Covid cases, hobbling lockdowns and property-sector woes that now span a boycott of mortgage payments on some unfinished projects.
The dollar slipped, with a gauge of the greenback’s strength down from a record high. Faster inflation bolstered New Zealand’s currency. Oil fell as the market digests slowing demand and whether supply will be increased after President Joe Biden’s visit to Saudi Arabia.
Treasuries won’t trade in Asia due to the Japan break. Treasury futures edged up. Inversions on parts of the yield curve are a sign the bond market views the Fed’s tightening cycle against inflation as still tough enough to risk recession.
Investors continue to be whipsawed by concerns over inflation and the potential for a US recession. At the same time, equity valuations have fallen back from pandemic-era peaks.
While stocks are pricing in a recession, there are signs that “this is a market that wants to start bottom fishing,” Lori Calvasina, head of US equity strategy at RBC Capital Markets, said on Bloomberg Television. “People are starting to look for things that have been de-risked,” she said, adding US small-caps are often cited as an example.
Data last week showing a drop in long-term US inflation expectations eased some fears that elevated price pressures are becoming entrenched. Strong retail sales underscored a resilient economy despite monetary tightening.
Traders are back to expecting a 75 basis points July Fed rate hike, after last week flirting with the prospect of a 100 basis points move to hammer inflation.
Still, the outlook remains troubling for many investors. The International Monetary Fund will cut its global economic growth outlook “substantially” in its next update as nations run out of options to tackle worsening risks.
Key events to watch this week:
- Earnings this week include Bank of America, Goldman Sachs, Tesla
- US Treasury Secretary Janet Yellen visits South Korea. Tuesday
- Reserve Bank of Australia releases July minutes. Tuesday
- UK Chancellor Nadhim Zahawi and Bank of England Governor Andrew Bailey speak at event. Tuesday
- Bloomberg Crypto Summit in New York. Tuesday
- Bank of Japan, European Central Bank rate decisions. Thursday
- Nord Stream 1 pipeline scheduled to reopen following maintenance. Thursday
Some of the main moves in markets:
- S&P 500 futures rose 0.4% as of 12:46 p.m. in Tokyo. The S&P 500 rose 1.9% Friday
- Nasdaq 100 futures rose 0.8%. The Nasdaq 100 rose 1.8%
- Australia’s S&P/ASX 200 Index rose 0.9%
- South Korea’s Kospi index added 1.8%
- Hong Kong’s Hang Seng Index rose 2.5%
- China’s Shanghai Composite Index rose 1.2%
- Euro Stoxx 50 futures added 0.4%
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro was at $1.0103
- The Japanese yen rose 0.2% to 138.35 per dollar
- The offshore yuan was at 6.7530 per dollar
- The yield on 10-year Treasuries declined four basis points to 2.92% Friday
- Australia’s 10-year bond yield added one basis point to 3.42%
- West Texas Intermediate crude was at $97.94 a barrel, up 0.4%
- Gold was at $1 714.66 an ounce, up 0.4%