European and US stock futures inched higher Friday while a gauge of global equities headed for a first-half gain of more about 12%, defying rising interest rates and the risk of recessions in major economies.
Treasuries steadied after a sharp rise in yields during the previous session and the yen lit up the currency market, whipsawing after weakening through the closely watched 145 level versus the dollar.
Contracts for the S&P 500 and Nasdaq 100 rose 0.1% and 0.3%, respectively, ahead of the release of PCE deflator figures in US which are studied by the Federal Reserve to assess underlying price pressures. The numbers are expected to show some softening while still indicating inflation remains sticky.
“Any sign that the inflation picture is firming, especially underneath the hood, would really solidify what we’re seeing in terms of expectations about further Fed rate hikes going into the fall,” Norman Villamin, chief investment officer of wealth management at Union Bancaire Privee, said on Bloomberg Television.
Looking across Asia markets as the second quarter draws to a close, Japan’s Topix was down for the day but headed for a gain of well over 20% since the start of the year. Chinese equities fluctuated Friday while remaining in the red versus the start of January. India’s Nifty 50 rose slightly as it headed for a first-half advance of more than 5%.
The yen’s depreciation through 145 for the first time since November was followed by a rapid retracement to around 144.70 after Finance Minister Shunichi Suzuki told reporters the government would respond appropriately to any excessive moves in the currency market.
The risk of intervention will rise if the Fed hikes rates in July and the yen gets closer to 150 to the dollar, according to strategist Shoki Omori at Mizuho Securities in Tokyo.
Figures released earlier on Friday showed inflation in Tokyo re-accelerated for the second time in three months in June, supporting expectations the Bank of Japan will raise its prices forecast. Yet this may not be enough to shift the BOJ’s monetary settings anytime soon, leaving the yen under pressure versus currencies like the dollar that are supported by higher interest rates.
The offshore yuan remained in the spotlight after the recent slide to its lowest level in seven months. It appreciated Friday, for the first time in three days, after the People’s Bank of China again set the daily reference rate for currency at a level stronger than the average estimate in a Bloomberg survey.
The currency is down almost 5% against the dollar this year, prompting extra scrutiny from Chinese regulators, according to people familiar with the matter.
Purchasing managers’ index data from China Friday underscored concern that the economy is losing steam, bolstering calls for more policy support.
Treasuries steadied on after a selloff in the previous session that saw two-year yields jump 15 basis points as investors moved closer to the Federal Reserve’s view for tighter monetary policy in the coming months. Swap markets now indicate a nearly 50% chance of a second Fed hike by year-end. A measure of dollar strength was little changed.
Australian and New Zealand short-term sovereign bond yields jumped around nine basis points as the upward pressure on rates flowed through.
Thursday’s readings on US jobless claims and the gross domestic product showed the world’s biggest economy was in better shape than many had envisioned at the start of 2023.
After the data came out, the US yield-curve inversion intensified — with longer-dated yields rising less than shorter-maturity ones. That means the economy may look stronger now, but investors expect the Fed’s rate increases to curb future growth, which could boost the risk of a recession down the road.
Elsewhere in markets, oil steadied as a traders weighed a hawkish rate outlook against positive signals from the US economy. Gold was little changed while headed for its third consecutive weekly loss.
Key events this week:
- US personal income and spending, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.1% as of 6:57 a.m. London time. The S&P 500 rose 0.45%
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 0.2%
- Euro Stoxx 50 futures rose 0.2%
- Japan’s Topix fell 0.4%
- Australia’s S&P/ASX 200 rose 0.2%
- Hong Kong’s Hang Seng was little changed
- The Shanghai Composite rose 0.8%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0868
- The Japanese yen was little changed at 144.68 per dollar
- The offshore yuan was little changed at 7.2636 per dollar
- The British pound rose 0.1% to $1.2626
- Bitcoin rose 1.1% to $30 726.61
- Ether rose 1.7% to $1,881.47
- The yield on 10-year Treasuries was little changed at 3.84%
- Japan’s 10-year yield advanced one basis point to 0.390%
- Australia’s 10-year yield advanced nine basis points to 4.00%
- West Texas Intermediate crude rose 0.1% to $69.96 a barrel
- Spot gold was little changed
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