Europe Futures Climb as Hong Kong Stocks Rally: Markets Wrap

(Bloomberg) — Equity futures in Europe and the US climbed and Hong Kong stocks paced a rally in Asian markets as a string of favorable news reports from China lured investors into risk assets. The dollar fell against major currencies.

Contracts for the Euro Stoxx 50 region-wide benchmark edged higher alongside an advance for S&P 500 futures after the US index fell on Tuesday. Hong Kong stocks gained about 2% to touch levels not seen since July. Australian and South Korean shares jumped more than 1%. Japan and mainland China stocks edged lower to buck the trend.

The rally in Hong Kong’s benchmark accelerated on news that China is considering further support for property developers, while shares in Hong Kong-listed Alibaba Group Holdings Ltd. jumped after reports that Ant Group Co., in which the e-commerce giant owns a stake, won approval for a $1.5 billion capital raising plan for its consumer unit. Separate reports that China is mulling an end to a ban on Australian coal sent the Australian dollar surging.

The greenback slid against all G-10 currencies. The yen advanced after the Bank of Japan unveiled further unscheduled bond buying. The yuan strengthened to levels not seen since August.

Australian and New Zealand 10-year government bond yields fell 10 basis points. The 10-year Treasury yield steadied after its biggest decline in more than a month. The price of oil fell further after the biggest drop in more than a month in the prior session.

Recession concerns lingered, with former New York Federal Reserve President William Dudley saying that an imminent slowdown won’t be severe while investors continue to mull the impact the central bank’s tightening will have on the economy. They’ll be paying attention to the jobs report this week, as softening in the labor market remains the Fed’s focus.

“If you don’t see a deep recession, you see a shallow recession, all that would be the recipe for markets to see a nice rally starting perhaps in the second half,” said Vasu Menon, executive director, investment strategy for OCBC Bank Wealth Management, in an interview with Bloomberg Television. “There is a lot of liquidity on the sidelines waiting to get back into play, waiting for those macro cues.”

The focus on China followed fledgling signs Covid infections may have peaked in some of its biggest cities. Anecdotal evidence showed the country remained in the grip of the pandemic with crematoriums overwhelmed in large cities such as Shanghai.

The prospect of a rapid reopening of China’s economy after the dismantling of Covid Zero policies may fail to materialize, according to Chris Senyek, chief investment strategist for Wolfe Research.

“In our view, there’s still a massive amount of uncertainty there, and whenever growth does begin to re-accelerate, inflation headwinds are more likely than not to offset global growth tailwinds,” he said in a note.

Read More: China Vows to Hit Back at Nations Imposing Covid Travel Curbs

The main markets moves are:

Stocks

S&P 500 futures rose 0.2% as of 3:26 p.m. Tokyo time. The S&P 500 fell 0.4%
Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 0.7%
The S&P/ASX 200 rose 1.6%
Hong Kong’s Hang Seng rose 2.5%
The Shanghai Composite rose 0.1%
Euro Stoxx 50 futures rose 0.3%

Currencies

The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.3% to $1.0575
The Japanese yen rose 0.2% to 130.70 per dollar
The offshore yuan rose 0.4% to 6.8948 per dollar

Cryptocurrencies

Bitcoin rose 1.2% to $16,857.07
Ether rose 3.2% to $1,249.76

Bonds

The yield on 10-year Treasuries declined three basis points to 3.71%
Japan’s 10-year yield advanced four basis points to 0.46%
Australia’s 10-year yield declined 10 basis points to 3.90%

Commodities

West Texas Intermediate crude fell 0.4% to $76.59 a barrel
Spot gold rose 0.5% to $1,848.53 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Vildana Hajric and Isabelle Lee.

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