European stocks and US equity futures pared losses sparked by China’s economic woes, while bonds gained amid signs of easing inflation.
(Bloomberg) — European stocks and US equity futures pared losses sparked by China’s economic woes, while bonds gained amid signs of easing inflation.
The Stoxx Europe 600 index pulled back from its lowest level in almost two months. China-exposed luxury-goods makers LVMH and Richemont remained among the biggest laggards, while Swedish landlord SBB plunged to an all-time low after its CEO said his holding company had deferred interest payments on a loan. Software and telecommunications stocks advanced, led by Capgemini SE after the Paris-based firm said it expanded a partnership with Google Cloud in data analytics and artificial intelligence.
Futures on the S&P 500 and Nasdaq 100 pointed to a muted day for US equities after a rally on Wall Street, fueled by excitement over artificial intelligence, fizzled on Tuesday. Treasury yields fell and a gauge of the dollar gained for the first time in four days.
The euro slumped to a two-month low against the dollar after French inflation eased more than anticipated, reaching its lowest level in a year. Data from Germany’s states also signaled inflation may be falling more quickly than expected in the region’s biggest economy, prompting traders to trim bets on future European Central Bank interest-rate increases. European bonds rallied, with the German 10-year yield down about 9 basis points.
“There’s a fairly consistent line with the euro-area CPI numbers: it is coming down,” Paul Donovan, chief economist at UBS Global Wealth Management, said on Bloomberg TV. “This whole idea of stickiness, of inflation sticking around, is really being blown out of the water. Interestingly, we’re also getting this confirmed in the regional data in the US.”
Slowing inflation would fuel a recovery in consumer demand, helping the global economy avert a worst-case scenario, Donavon said. That would ease some of investors’ concerns about the outlook for corporate profits, though worries about China’s uneven recovery continue to weigh on markets.
An Asian equity gauge headed toward a two-month low after China reported the softest reading in its purchasing managers’ index since December. Hong Kong’s Hang Seng Index fell more than 2%, with a bear market on the horizon. The offshore yuan hit its weakest level versus the dollar in six months.
Copper extended its worst monthly loss in almost a year and iron ore fell further below $100 a ton, as China’s slowing manufacturing raised concerns about demand from the top metals-consuming economy.
AI Exuberance
In Tuesday’s trading in the US, the Nasdaq 100 added 0.4% to extend this year’s surge to 31%. Yet it ended off its high for the day as investors assessed the artificial-intelligence hype that’s boosted the index. Nvidia Corp. hovered near $1 trillion in value after announcing several AI-related products.
AI-related software providers now stand to reap the benefits that Nvidia has laid, according to Cathie Wood, CEO and founder of Ark Investment Management. “For every dollar of hardware that Nvidia sells, software providers, SaaS providers will generate eight dollars in revenue,” she said on Bloomberg Television.
Investors also remain focused on the debt-limit deal forged by President Joe Biden and House Speaker Kevin McCarthy. The bill is heading for a House vote Wednesday after clearing a crucial procedural hurdle with just days remaining to avoid a US default. Congress is racing to pass the measure before June 5, the date when Treasury Secretary Janet Yellen has warned the US risks default.
Meanwhile, Federal Reserve Bank of Richmond President Thomas Barkin said he is looking for signs that demand is cooling to be convinced that US inflation will ease. His Cleveland counterpart Loretta Mester said she sees no “compelling reason” to pause interest-rate increases, particularly in the wake of the debt-limit deal.
Fed officials raised the central bank’s benchmark rate above 5% earlier this month and signaled they may be ready to pause the rapid tightening campaign they began last year. Stronger-than-expected economic data since then have built market expectations for another rate hike in June.
Key events this week:
- US job openings, Wednesday
- Federal Reserve’s Beige Book, Wednesday
- Fed’s Patrick Harker, Susan Collins and Michelle Bowman speak at events, Wednesday
- China Caixin manufacturing PMI, Thursday
- Eurozone HCOB Eurozone Manufacturing PMI, CPI, unemployment, Thursday
- US construction spending, initial jobless claims, ISM Manufacturing, Thursday
- ECB President Christine Lagarde speaks at conference, Thursday
- Fed’s Patrick Harker speaks at webinar, Thursday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.2% as of 10:26 a.m. London time
- S&P 500 futures fell 0.2%
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 1.4%
- The MSCI Emerging Markets Index fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.6% to $1.0666
- The Japanese yen was little changed at 139.90 per dollar
- The offshore yuan fell 0.5% to 7.1249 per dollar
- The British pound fell 0.5% to $1.2356
Cryptocurrencies
- Bitcoin fell 2.4% to $27,112.95
- Ether fell 1.8% to $1,869.37
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.65%
- Germany’s 10-year yield declined nine basis points to 2.25%
- Britain’s 10-year yield declined eight basis points to 4.17%
Commodities
- Brent crude fell 0.5% to $73.16 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu, Tassia Sipahutar and Eva Szalay.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.