US equity futures climbed with Asian stocks as relative calm returned to markets Thursday following a tumultuous day of losses on Wall Street.
(Bloomberg) — US equity futures climbed with Asian stocks as relative calm returned to markets Thursday following a tumultuous day of losses on Wall Street.
An index of Asian shares rose more than 1% as gauges in Hong Kong and mainland China rallied. Euro Stoxx 50 contracts fell slightly as investors awaited interest decisions from the Bank of England and its counterparts in Switzerland and Norway.
The tone during the Asian session was a sharp contrast to that in the US on Wednesday, when traders got a double dose of stress that reversed an initial rally in shares following the Federal Reserve’s expected 25-basis-point rate hike.
Treasury Secretary Janet Yellen told lawmakers that the government wasn’t considering “blanket” deposit insurance to stabilize the banking system, sending stocks in the sector rapidly lower. At around the same time, Fed chief Jerome Powell was pushing back against bets for rate cuts this year and said he was prepared to keep raising borrowing costs until inflation showed signs of cooling.
Weakness in the dollar, which extended its run of declines to a sixth day, was seen helping insulate Asia from some of the global banking turmoil, particularly in emerging markets. The greenback fell against all of its Group-of-10 currency counterparts.
Treasury two-year yields dropped about six basis points, adding to the plunge of 23 basis points on Wednesday. Government bond yields fell in Australia and New Zealand, with the moves reaching about 10 basis points in policy-sensitive shorter maturities.
While markets are in a “higher volatility regime” these days amid uncertainly over the outlook for rates and economic growth, a degree of moderation is possible Thursday, according to John Bromhead, a strategist at Australia & New Zealand Banking Group. “I suspect now the major risk event is out of the way, risk-tone can improve through the day,” he said.
The swap market shows investors are split on the chances that Fed officials will add another 25 basis points to their benchmark in May. Despite Powell’s guidance, expectations for cuts have deepened, with the market suggesting that the effective fed funds rate will drop to around 4.1% in December.
“I would not expect the market to take these rate cuts out in the near term and could very well price in more cuts if the data deteriorates from here,” Matthew Hornbach, global head of macro strategy at Morgan Stanley, told Bloomberg Television.
Powell himself, though, said in response to questioning that officials “just don’t” see cuts this year and that they will raise higher than expected if that is needed. “Rate cuts are not in our base case,” he said.
Elsewhere in markets, oil fell as investors weighed the developments at the Fed and digested a mixed snapshot of US supply and demand. Gold rose and Bitcoin rose.
Chinese internet giant Tencent Holdings Ltd. was a standout performer in Hong Kong, surging more than 6% amid strength in its online ad sales. Chinese markets in general stood out Thursday for their quiet strength relative to recent strife in Europe and America.
Separately, investors were on tenterhooks awaiting another report from Hindenburg Research, the US short seller that targeted Gautam Adani’s group earlier this year. There were no details on the subject of the new report.
Key events this week:
- Eurozone consumer confidence, Thursday
- BOE interest rate decision, Thursday
- Swiss National Bank rate decision and press conference, Thursday
- US new home sales, initial jobless claims, Thursday
- US Treasury Secretary Janet Yellen testifies to a House Appropriations subcommittee, Thursday
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- US durable goods, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.5% as of 6:50 a.m. London time. The S&P 500 fell 1.7%.
- Nasdaq 100 futures rose 0.7%. The Nasdaq 100 fell 1.4%
- Euro Stoxx 50 futures fell 0.4%
- Japan’s Topix fell 0.3%
- Australia’s S&P/ASX 200 Index fell 0.7%
- Hong Kong’s Hang Seng Index rose 1.7%
- China’s CSI 300 rose 0.9%
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.6% to $1.0922
- The Japanese yen rose 0.5% to 130.73 per dollar
- The offshore yuan rose 0.6% to 6.8197 per dollar
- The Australian dollar rose 0.8% to $0.6740
- The British pound rose 0.5% to $1.2331
Cryptocurrencies
- Bitcoin rose 1.2% to $27,711.24
- Ether rose 1.1% to $1,756.19
Bonds
- The yield on 10-year Treasuries was little changed at 3.44%
- Japan’s 10-year yield declined 2.5 basis points to 0.295%
- Australia’s 10-year yield declined seven basis points to 3.29%
Commodities
- West Texas Intermediate crude fell 1% to $70.22 a barrel
- Spot gold rose 0.5% to $1,979.45 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth, Matthew Burgess and Georgina Mckay.
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