European equity futures rose alongside Asian stocks, as optimism over an eventual breakthrough for US debt-ceiling talks boosted risk-taking appetite. The yuan extended losses despite guidance from the central bank.
(Bloomberg) — European equity futures rose alongside Asian stocks, as optimism over an eventual breakthrough for US debt-ceiling talks boosted risk-taking appetite. The yuan extended losses despite guidance from the central bank.
Contracts for the Euro Stoxx 50 benchmark climbed around 0.6% in Asian trading while US contracts were flat. The S&P 500 and Nasdaq 100 rallied more than 1% on Wednesday on debt-talks optimism. The CBOE VIX index of equity market volatility fell below 17 to close at the lowest level since the start of the month.
A gauge of Asian stocks headed for its biggest gain since March, with benchmarks in Australia, Hong Kong and South Korea advancing. Japan’s Topix index climbed around 1% to set a fresh 33-year high as rising exports and a weakening yen helping to fuel positive sentiment.
Tech stocks rallied in both Hong Kong and Japan, with Alibaba Group Holding Ltd. gaining 2.6% ahead of its earnings release Thursday. Chipmakers were among best performers on the Nikkei 225 after Japan Prime Minister Fumio Kishida met with global executives to boost the country’s domestic semiconductor sector.
“Japan has a huge focus on the return on equity parameter — that is helping the stock rally,” Anita Gupta, head of equity strategy for Emirates NBD, said in an interview with Bloomberg Television. “In Japan we were expecting a rebound and it happened. We think there is more to go.”
President Joe Biden expressed confidence there will be no US default, and House Speaker Kevin McCarthy said reaching an agreement this week is “doable.” JPMorgan Chase & Co. chief Jamie Dimon said the US government “probably” will not default on its debt after he and other bank leaders met in Washington to discuss the debt limit.
“Despite some constructive headlines around negotiations there are risks around the US debt ceiling,” Chris Weston, head of research for Pepperstone Group Ltd., wrote in a note. “If we do see increased market stress in early June, then it will impact EU equity too.”
The dollar climbed while Treasuries were little changed in Asia. That was after the yield on the US two-year note rose seven basis points on Wednesday, while the 10-year yield climbed three basis points to 3.56%.
European Central Bank Vice President Luis de Guindos said the ECB has completed most of its tightening but there is still “a way to go.” The euro was little changed.
The yuan fell 0.3% against the dollar in both onshore and offshore markets, extending a loss after breaching a key level on Wednesday. The People’s Bank of China set a stronger daily fix than analysts expected, signaling a desire to manage the pace of decline.
Australia’s dollar dropped after the country reported an increase in unemployment, which reinforced the case for the central bank to stand pat at next month’s policy meeting.
“The Australian wages and labor market data as well as the China economic data raise the chance the Reserve Bank of Australia will stay on hold for an extended period,” said David Forrester, Singapore-based senior currency strategist at Credit Agricole CIB.
The yen drifted higher after falling almost 1% on Wednesday. The Japanese currency has dropped more than 3% this quarter as traders increasingly expect the central bank to maintain its ultra-loose monetary policy. Citigroup Inc. said the the officials’ lack of urgency to assess yield-curve control was received by markets as dovish.
Meanwhile, the Philippine central bank is forecast to hold interest rates at 6.25%. New Zealand’s Treasury Department predicted the country will avoid recession, in a budget released Thursday.
US Banks
Nomura Holdings Inc. gained even after the Japanese company said it would cut its profit forecast.
US regional banks rallied after Western Alliance Bancorp reported growth in deposits boosted sentiment and eased worries about the health of the industry. All members of the KBW Regional Banking index advanced, pushing the benchmark 7.3% higher for its best day since January 2021.
Walmart Inc. is due to report in the US.
Key events this week:
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 2:58 p.m. Tokyo time. The S&P 500 roes 1.2%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1.2%
- Japan’s Topix rose 1.2%
- Australia’s S&P/ASX 200 rose 0.4%
- Hong Kong’s Hang Seng rose 0.4%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0831
- The Japanese yen rose 0.1% to 137.51 per dollar
- The offshore yuan fell 0.3% to 7.0315 per dollar
Cryptocurrencies
- Bitcoin fell 0.4% to $27,230.46
- Ether fell 0.4% to $1,819.26
Bonds
- The yield on 10-year Treasuries was little changed at 3.57%
- Australia’s 10-year yield advanced six basis points to 3.48%
Commodities
- West Texas Intermediate crude fell 0.5% to $72.44 a barrel
- Spot gold fell 0.2% to $1,978.65 an ounce
This story was produced with the assistance of Bloomberg Automation.
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