Stocks extend gains; treasuries slip with dollar: markets wrap

Brent crude rose 0.6% to $113.79 a barrel.
Image: Bloomberg

Global stocks extended gains on Monday after posting their best performance in a month last week.

Mining stocks led an advance in Europe’s Stoxx 600, while Chinese technology shares helped an Asian equity index jump more than 1.5%. US futures rose, with tech stocks set to extend gains following their best week since March.

Quarterly portfolio rebalancing by institutional buyers could be helping equities as investors assess whether inflation is cresting and recession can be averted. JPMorgan Chase & Co.’s Marko Kolanovic is calling for stocks to rise 7% this week as pension and sovereign wealth funds shift their exposures.

Treasuries slipped, pushing the rate on the US 10-year note to 3.14%. Yields have retreated from June highs on growth worries, but whether that marks the end of the Treasury bear market is a live debate. The dollar dipped.

Industrial metals rebounded, while oil and European natural gas prices rose. A degree of improvement in China’s economy amid easing Covid restrictions may be helping sentiment toward raw materials.

In company moves, Prosus NV jumped on plans to sell more of its $134 billion stake in Chinese internet giant Tencent Holdings to finance a buyback program, reversing a pledge to hold onto the full shareholding.

Investors are parsing incoming data to work out if the highest inflation in a generation is close to topping out. In time, that could give policy makers latitude to ease up on sharp interest-rate hikes. A more troubling scenario is of lasting price pressures and tighter policy even as the global economy falters.

“There’s a feeling that things aren’t as bad as we thought they were going to be,” Carol Pepper, founder of Pepper International, said on Bloomberg Radio. She added “there’s a hope that perhaps we’ve oversold, perhaps there’s not going to be a recession.”

Federal Reserve Bank of San Francisco President Mary Daly said Friday she favours another 75 basis-point rate increase in July. Meanwhile, Fed Bank of St. Louis President James Bullard said fears of a US recession are overblown.

Russia default

Elsewhere, Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes.

Traders are monitoring a summit of the Group of Seven leaders, who plan to commit to indefinite support for Ukraine in its defense against Russia’s invasion. The G-7 in addition is weighing a price cap on Russian oil.

The US, UK, Japan and Canada also plan to announce a ban on new gold imports from Russia during the G-7 summit. Prices for the precious metal rose.

In cryptocurrencies, Bitcoin and a range of other tokens weakened slightly but the largest virtual coin held above $21 000.

What to watch this week:

  • US durable goods, Monday
  • San Francisco Fed President Mary Daly comments, Tuesday
  • ECB President Christine Lagarde, Federal Reserve Chair Jerome Powell, BOE Governor Andrew Bailey and Cleveland Fed President Loretta Mester due to speak at ECB event, Wednesday
  • US GDP, Wednesday
  • St. Louis Fed President James Bullard speaks, Wednesday
  • China PMI, Thursday
  • US consumer income, PCE deflator, initial jobless claims, Thursday
  • Eurozone CPI; US construction spending, ISM Manufacturing, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 1.1% as of 8:50 a.m. London time
  • Futures on the S&P 500 rose 0.7%
  • Futures on the Nasdaq 100 rose 0.8%
  • Futures on the Dow Jones Industrial Average rose 0.5%
  • The MSCI Asia Pacific Index rose 1.2%
  • The MSCI Emerging Markets Index rose 1.6%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%
  • The euro rose 0.3% to $1.0582
  • The Japanese yen rose 0.2% to 134.98 per dollar
  • The offshore yuan was little changed at 6.6815 per dollar
  • The British pound rose 0.4% to $1.2318

Bonds

  • The yield on 10-year Treasuries advanced one basis point to 3.14%
  • Germany’s 10-year yield advanced two basis points to 1.46%
  • Britain’s 10-year yield advanced two basis points to 2.32%

Commodities

  • Brent crude rose 0.6% to $113.79 a barrel
  • Spot gold rose 0.5% to $1 836.44 an ounce
© 2022 Bloomberg

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