Stocks rose with US index futures as a rally in Chinese tech shares boosted sentiment and concern about contagion from banking turmoil continued to wane.
(Bloomberg) — Stocks rose with US index futures as a rally in Chinese tech shares boosted sentiment and concern about contagion from banking turmoil continued to wane.
Tech shares led gains in European equities, while banks also outperformed. UBS Group AG rose after the Swiss lender brought back a former CEO to oversee the acquisition of Credit Suisse Group AG. Contracts on all three major U.S. gauges climbed, with the Nasdaq 100 poised to extend its best quarter since 2020.
Alibaba Group Holdings Ltd. fell in US premarket trading after surging Tuesday on plans to split. Its Hong Kong-listed shares were 12% higher, tracking overnight gains on Wall Street. That sparked a rally in Chinese tech shares as investors piled into the companies that were stung by a crackdown from Beijing over the past two years.
Treasuries rose after a two-day selloff as investors awaited remarks from Federal Reserve officials and economic releases this week for clues on monetary policy. In particular focus will be data on the central bank’s preferred measure of inflation — the so-called core PCE deflator — which is likely to factor into the Fed’s next policy decision.
Swaps traders have priced in about a 50% probability the Fed will raise rates by a quarter point at its next meeting, with plans to ease thereafter. However, several strategists have joined BlackRock Investment Institute in saying markets are wrong in expecting imminent rate cuts.
The bad news for markets “is that the Fed is very unlikely to cut rates until Q2 2024, unless US growth slows more markedly than we anticipate, leaving us with a ‘higher for longer’ scenario,” Willem Sels, global chief investment officer at HSBC Private Banking and Wealth, wrote in a note on the outlook for the next quarter.
“Another key consideration for investors should be China’s reopening and the bounce in consumer activity, which markets are still completely underestimating,” he added, saying China’s renewed focus on growth will help reduce the risk of a recession in the rest of the world.
Investors are assessing risks of recession and the trajectory of central-bank policy after banking turmoil earlier this month sparked fears of wider contagion. An index of dollar strength was steady after ending Tuesday near the lowest level in eight weeks.
“The banking crisis and the new tighter standards for banks is equivalent to one to two rate hikes,” said Eva Ados, chief investment strategist for ERShares, in an interview with Bloomberg Television. “There is a big possibility here of a pricing mistake. We are pricing in the rate drop rather than the reason why rates are dropping, which is the banking crisis.”
Elsewhere, oil was higher after an industry report signaled a big draw in US crude stockpiles as an ongoing dispute halts exports from Turkey.
The Australian dollar weakened after slower-than-forecast inflation data bolstered the case for the central bank to pause its run of interest-rate increases.
Among other notable movers, Lululemon Athletica Inc. jumped in US premarket trading after its earnings and outlook topped estimates.
Airbus SE rose in Paris after saying it will no longer pursue a minority stake in Atos SE’s Evidian unit.
Key events this week:
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.9% as of 10:36 a.m. London time
- S&P 500 futures rose 0.9%
- Nasdaq 100 futures rose 0.9%
- Futures on the Dow Jones Industrial Average rose 0.8%
- The MSCI Asia Pacific Index rose 0.8%
- The MSCI Emerging Markets Index rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0849
- The Japanese yen fell 0.6% to 131.69 per dollar
- The offshore yuan fell 0.2% to 6.8892 per dollar
- The British pound was unchanged at $1.2342
Cryptocurrencies
- Bitcoin rose 4.1% to $28,441.85
- Ether rose 2.5% to $1,819.25
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.54%
- Germany’s 10-year yield declined one basis point to 2.28%
- Britain’s 10-year yield declined two basis points to 3.44%
Commodities
- Brent crude rose 0.3% to $78.91 a barrel
- Spot gold fell 0.3% to $1,966.70 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Cecile Gutscher and Michael Msika.
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