Equity markets attempted to shake off recent weakness amid bets on Chinese stimulus and optimism that an economic downturn may prove less severe than feared.
(Bloomberg) — Equity markets attempted to shake off recent weakness amid bets on Chinese stimulus and optimism that an economic downturn may prove less severe than feared.
Nasdaq 100 futures added 0.4%, showing that traders are positioning for a rebound after the tech benchmark sank 1.4% on Monday. Tesla Inc. shares added 1.7% in pre-market trading, while Advanced Micro Devices Inc. and Meta Platforms Inc. advanced.
In Europe, equities were slightly weaker after European Central Bank President Christine Lagarde dashed hopes of an imminent end to the interest-rate hiking cycle. The Stoxx 600 Index dipped 0.1%, marking a seventh day of declines and the longest losing streak since February 2018.
Markets are coming to terms with the view that the Federal Reserve won’t cut interest rates this year and other central banks will continue raising rates to quell inflation. Morgan Stanley economists said in research note on Tuesday that they see the Fed hiking by 25 basis points next month.
On the positive side, there’s also growing speculation among investors that any recession may be shallow and less damaging to earnings than expected.
“Growth has held up well thus far,” said Mark Dowding, chief investment officer at BlueBay Asset Management. “With central banks nearing the end of their rate hiking cycles, this has fed hopes of a relatively soft landing in economic terms, without a more severe recession.”
Lagarde Says ECB Won’t Be Able to Declare Rate Peak Soon
Lagarde’s comments at the ECB’s annual retreat in Portugal adds to evidence that central banks will keep pushing rates higher and possibly send fragile economies into reverse. Her peers from the US, Japan and the UK are slated to speak at the same forum later this week.
Some of the concerns for the world economy have been tempered by signs China is pushing back against investors’ pessimism and stepping up support for its currency. State-owned newspaper China Securities Journal said Tuesday that pro-growth measures would improve the yuan’s outlook, though Beijing will likely remain wary of adding excessive stimulus.
There are also positive signs in the US-China relationship from a report that US Treasury Secretary Janet Yellen plans to visit Beijing next month for talks with her new Chinese counterpart He Lifeng.
The China optimism put a gauge of Asian equities on course for its first advance in seven days, buoyed by a rally in Hong Kong-listed technology stocks. Iron ore and copper also gained. Oil hovered near $69 a barrel in New York.
Among individual stock movers, Amsterdam-listed Prosus NV jumped 6% after winning regulatory approval to remove its cross-holding structure with Naspers Ltd. Volkswagen AG dragged autos stocks down following a report that it’s planning to cut back production of one of its electric SUV models due to weak sales.
Key events this week:
- US new home sales, durable goods, Conference Board consumer confidence, Tuesday
- US wholesale inventories, goods trade balance, Wednesday
- Fed to unveil results of annual banking industry stress test, Wednesday
- Policy panel with ECB’s Christine Lagarde, Fed Chair Jerome Powell, BOJ’s Kazuo Ueda and BOE’s Andrew Bailey speak, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Atlanta Fed President Rafael Bostic speaks, Thursday
- China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday
- US personal income and spending, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 6:46 a.m. New York time
- Nasdaq 100 futures rose 0.4%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.4% to $1.0947
- The British pound rose 0.2% to $1.2733
- The Japanese yen fell 0.1% to 143.70 per dollar
Cryptocurrencies
- Bitcoin rose 1.4% to $30,591.8
- Ether rose 1.6% to $1,880.27
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.73%
- Germany’s 10-year yield was little changed at 2.31%
- Britain’s 10-year yield advanced three basis points to 4.33%
Commodities
- West Texas Intermediate crude fell 1.3% to $68.60 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar and Anchalee Worrachate.
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