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Stocks rise on optimism at China support measures: Markets wrap

Finance

European futures rose following a stock rally across Asia, after China stepped up support for its struggling property sector and signaled more economic aid may be on the way. The dollar weakened against most of its major peers.

A gauge of Asian equities climbed more than 1% with the biggest gains in Hong Kong, South Korea and Taiwan. State-run financial newspapers in China published reports Tuesday flagging the likely adoption of more property support policies, along with steps to boost business confidence.

Asian chip stocks rose after Taiwan Semiconductor Manufacturing Co. reported better-than-expected sales and their US peers climbed Monday. European stock futures ticked higher, while US stock futures were little changed after the S&P 500 Index climbed 0.2% Monday.

In the UK, data showed that wage growth held at a level that Bank of England Governor Andrew Bailey said is fueling inflation, maintaining pressure for higher interest rates. The data is crucial to shaping the central bank’s next decision on rates in August. The pound rose to the highest versus the dollar since April 2022.

Bloomberg’s dollar index dropped for a third day as Treasury yields extended Monday’s declines. The yen strengthened as a narrowing US/Japan bond yield spread spurred traders to trim long positions on the US currency. The offshore yuan extended gains into a fourth day.

Investors in Asia continue to expect more concrete steps from Beijing to bolster the nation’s tepid recovery. China’s stuttering economy is already having a wide-ranging impact on markets, with the chairman of mining giant Rio Tinto Group this week warning of knock-on effects to demand for industrial metals.

“The economic recovery hasn’t come into the type of level that we expected yet,” Cecilia Chan, Asia Pacific chief investment officer at HSBC Global Asset Management, said on Bloomberg Television. “However we maintain an optimistic view with China, we know that the government will give more stimulus measures.”

Inflation challenge

China’s economic troubles come as many other countries contend with a different issue — stubbornly high inflation and rising interest rates. In Monday’s session on Wall Street, traders sifted through remarks from a slew of Federal Reserve speakers while awaiting Wednesday’s consumer price index data that will help determine the path for rate hikes.

Fed officials Michael Barr, Mary Daly and Loretta Mester said the central bank will need to tighten further this year to bring inflation back down to the 2% goal. Meanwhile, New York Federal Reserve President John Williams said in an interview with the Financial Times that he doesn’t have a recession in his forecast.

There may be more pain on the way for the S&P 500 as profit warnings and fears of higher interest rates combine to threaten US equities, according to the latest Markets Live Pulse survey. The earnings season kicks off in earnest on Friday, when JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report their numbers.

“Last week’s surge in government bond yields put some pressure on equities – and highlights that companies will need to deliver on the market’s earnings expectations as the Q2 reporting season gets underway,” BlackRock Investment Institute analysts including Jean Boivin wrote in a note. “Resilient consumers have helped support earnings, but we see them exhausting the savings built up during the pandemic this year.”

Elsewhere, oil rose, while gold was little changed.

Key events this week:

  • St. Louis Fed President James Bullard speaks, Tuesday
  • Canada rate decision, Wednesday
  • Bank of England Governor Andrew Bailey speaks, Wednesday
  • US CPI, Wednesday
  • Federal Reserve issues Beige Book, Wednesday
  • Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
  • China trade, Thursday
  • Eurozone industrial production, Thursday
  • US initial jobless claims, PPI, Thursday
  • US University of Michigan consumer sentiment, Friday
  • US banks kick off earnings, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 7:33 a.m. London time
  • Nasdaq 100 futures rose 0.3%
  • Futures on the Dow Jones Industrial Average rose 0.1%
  • The MSCI Asia Pacific Index rose 1.2%
  • The MSCI Emerging Markets Index rose 1.2%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%
  • The euro rose 0.2% to $1.1018
  • The Japanese yen rose 0.4% to 140.79 per dollar
  • The offshore yuan rose 0.4% to 7.2035 per dollar
  • The British pound rose 0.3% to $1.2905

Cryptocurrencies

  • Bitcoin fell 0.6% to $30,587.27
  • Ether fell 0.3% to $1,887.21

Bonds

  • The yield on 10-year Treasuries declined two basis points to 3.97%
  • Germany’s 10-year yield declined two basis points to 2.62%
  • Britain’s 10-year yield declined one basis point to 4.64%

Commodities

  • Brent crude rose 0.3% to $77.94 a barrel
  • Spot gold rose 0.3% to $1 931.51 an ounce

© 2023 Bloomberg

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