Stocks gained along with US and European futures Thursday as traders weighed the debt woes of China Evergrande Group and the prospect of a reduction in Federal Reserve stimulus as early as November.
Equities in China and Hong Kong rose modestly, while European and US contracts climbed after the S&P 500 pushed higher for the first time in five sessions. Evergrande’s stock rallied before paring the advance, signaling concerns remain about the crisis-hit developer’s more than $300 billion of liabilities. A liquidity injection by China’s central bank aided sentiment.
Chair Jerome Powell said the Fed could begin scaling back asset purchases in November and complete the process by mid-2022. Officials also revealed a growing inclination to raise interest rates next year. The Treasury yield curve flattened. Cash Treasuries aren’t trading in Asia because of a Japan holiday. The dollar slipped.
Traders are continuing to monitor the cash-crunch at Evergrande. Questions remain after the firm issued a vaguely worded statement on a local bond interest payment. The focus has shifted to a payment due on a dollar note.
“I am not so concerned about the contagion to developed markets or even to the rest of the emerging markets, but this is far from resolved,” Joyce Chang, JPMorgan Global Research chair, said on Bloomberg Television, referring to the Evergrande situation. “I do think that the government will do something that is more state-guided in this case.”
Powell said he didn’t expect the Fed to begin rate increases until after completing a taper process that would wrap up around the middle of 2022. The gradual shift away from ultra-loose policy, along with fears of contagion emanating from Evergrande, have shaped a volatile week for markets amid worries about a slowing recovery from the pandemic.
“The Fed has got to pleased that their communication on the longer way to tapering has avoided the dreaded fear of the tantrum,” Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at BlackRock Inc., said on Bloomberg Television.
Elsewhere, oil advanced, gold was lower and Bitcoin traded near $44 000.
Here are key events to watch this week:
- Bank of England rate decision, Thursday
- Fed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.3% as of 6:41 a.m. in London. The S&P 500 rose 1%
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 1%
- Australia’s S&P/ASX 200 Index added 1.2%
- South Korea’s Kospi index fell 0.5%
- Hong Kong’s Hang Seng Index advanced 0.7%
- China’s Shanghai Composite Index rose 0.5%
- Euro Stoxx 50 futures gained 0.6%
- The Japanese yen traded at 109.81 per dollar
- The offshore yuan was at 6.4662 per dollar
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was at $1.1712
- The yield on 10-year Treasuries declined two basis points to 1.30%
- Australia’s 10-year bond yield was at 1.25%
- West Texas Intermediate crude was at $72.54 a barrel, up 0.4%
- Gold was at $1 766.70 an ounce, down 0.1%