Stocks jump as China stimulus vow stirs optimism: markets wrap

Gold was at $1 910.45 an ounce, up 0.8%.
Image: Bloomberg

Stocks in Asia pushed higher Friday after China promised to scale up economic stimulus and as traders speculated that Beijing will relent on a crackdown on internet companies.

Chinese shares jumped more than 2% and the Hang Seng Tech Index about 9% following the pledge from China’s top leaders, whose vow of support for so-called platform firms stirred the bets on an easing internet clampdown.

But there was no backing away from lockdowns to fight the nation’s Covid outbreak, a strategy that has hampered economic growth. Still, the dollar dipped and commodities got a boost from improved risk appetite in the wake of the stimulus pledge.

US equity futures pared losses. They were earlier under pressure from post-earnings slumps in Amazon.com Inc. and Apple Inc. in extended US trading on concerns about the outlooks for both tech giants.

In foreign-exchange markets, the yuan appreciated and the yen snapped a slide while staying near 20-year lows. The euro, pound and commodity-linked currencies made gains.

Treasuries declined, taking the 10-year US yield to 2.84%, as investors gird for aggressive Federal Reserve interest-rate hikes to tame high inflation.

While China’s announcement brought some relief for markets, many risks remain. They span China’s ongoing Covid challenges, the impact of the Fed on the US economy and Russia’s war in Ukraine.

“The Fed’s record on soft landings is not that strong,” Carol Schleif, deputy chief investment officer at BMO Family Office LLC, said on Bloomberg Television. “Markets are watching very, very carefully to see if we can thread that needle.”

The latest US data showed that the world’s largest economy unexpectedly shrank for the first time since 2020. That reflected an import surge tied to solid consumer demand, suggesting growth will return imminently.

US Outlook

The figures underscore the debate about how much scope the US central bank has to tighten policy before the economy cracks. Markets continue to project a half-point Fed rate hike next week.

“A year from now, 10-year yields are most likely going to be lower than where we are today,” Jimmy Chang, chief investment officer at Rockefeller Financial LLC, said on Bloomberg Television, referring to Treasuries. “I do believe at some point the economy starts to weaken, the Fed will be less hawkish, perhaps even go into a pause mode by, say, early next year.”

Meanwhile, oil was above $105 a barrel. Traders are evaluating the prospect of a European Union ban on Russian crude in retaliation for the invasion of Ukraine.

Elsewhere, Elon Musk sold about $4 billion worth of Tesla Inc. shares after announcing a blockbuster $44 billion deal to buy Twitter Inc. Musk tweeted that he has “no further Tesla sales planned after today.”

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.3% as of 7:22 a.m. in London. The S&P 500 rose 2.5%
  • Nasdaq 100 futures dropped 0.5%. The Nasdaq 100 rose 3.5%
  • Australia’s S&P/ASX 200 index added 1.1%
  • South Korea’s Kospi rose 1%
  • Hong Kong’s Hang Seng index increased 3.2%
  • China’s Shanghai Composite index rose 2.4%
  • Euro Stoxx 50 futures climbed 1.2%

Currencies

  • The Bloomberg Dollar Spot Index dipped 0.4%
  • The euro was at $1.0542, up 0.4%
  • The Japanese yen was at 130.29 per dollar, up 0.4%
  • The offshore yuan was at 6.6260 per dollar, up 0.5%

Bonds

  • The yield on 10-year Treasuries rose two basis points to 2.84%

Commodities

  • West Texas Intermediate crude was at $105.80 a barrel, up 0.4%
  • Gold was at $1 910.45 an ounce, up 0.8%
© 2022 Bloomberg

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