Stocks rose with US index futures as a rally in Chinese tech shares boosted sentiment and concern about contagion from the 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 the banking turmoil continued to wane.
Contracts on the three main U.S. gauges climbed, with the Nasdaq 100 poised to extend its best quarter since 2020. Alphabet Inc. and Tesla Inc. rose in premarket trading, while tech shares were among the best performers in European equities.
Sentiment for the sector got a boost as Alibaba Group Holdings Ltd.’s massive overhaul plan sparked optimism about a recovery in Chinese tech companies that were stung by a crackdown from Beijing over the past two years. The Hang Seng Tech Index rose 2.5%.
Bank shares outperformed in Europe, with UBS Group AG rising after the Swiss lender brought back a former CEO to oversee the acquisition of Credit Suisse Group AG.
Treasuries fell and the dollar rose slightly 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 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 say 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. Global stocks have since recouped losses for the month.
“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 as Iraqi exports via Turkey remain disrupted amid a dispute with Kurdish authorities, while an industry report showed a decline in US stockpiles.
Among other notable movers, Lululemon Athletica Inc. jumped in US premarket trading after its earnings and outlook topped estimates. Cryptocurrency-exposed stocks gained as Bitcoin extended a rally to breach the $28,000 level.
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
- S&P 500 futures rose 0.8% as of 8:31 a.m. New York time
- Nasdaq 100 futures rose 0.8%
- Futures on the Dow Jones Industrial Average rose 0.7%
- The Stoxx Europe 600 rose 0.9%
- The MSCI World index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0850
- The British pound fell 0.2% to $1.2322
- The Japanese yen fell 1.2% to 132.40 per dollar
Cryptocurrencies
- Bitcoin rose 3.8% to $28,363.29
- Ether rose 1.8% to $1,807.16
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.59%
- Germany’s 10-year yield advanced four basis points to 2.33%
- Britain’s 10-year yield advanced four basis points to 3.49%
Commodities
- West Texas Intermediate crude rose 1.2% to $74.08 a barrel
- Gold futures fell 0.3% to $1,984.80 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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