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Equity markets attempted on Tuesday to shake off recent weakness amid renewed expectations for further Chinese stimulus and optimism that a looming downturn economic downturn could prove less severe than feared.
The Stoxx Europe 600 index ceded its opening gains after European Central Bank President Christine Lagarde dashed hopes of an imminent end to the interest-rate hiking cycle. Among individual movers, Prosus NV jumped close to 10% after getting regulatory approval to remove its cross-holding structure with Naspers Ltd. Volkswagen AG dragged autos stocks down after a report that it’s planning to cut back production of one of its electric SUV models due to weak sales.
S&P 500 and Nasdaq 100 futures rose around 0.3%, trying to emerge from last week’s losses, the worst since March, amid concern that the Federal Reserve will push the US economy into recession. While markets are coming to terms with the view that the Fed will not cut interest rates this year, many reckon recession could be relatively shallow and less damaging to companies’ earnings than expected.
“Growth has held up well thus far,” said Mark Dowding, chief investment office at BlueBay Asset Management. “With central banks nearing the end of their rate hiking cycles, so this has fed hopes of a relatively soft landing in economic terms, without a more severe recession.”
The relatively upbeat mood in markets weighed on bond prices while the dollar slipped against its Group-of-Seven peers. Iron ore and copper gained on expectations China could announce more support for its ailing economy.
Lagarde’s comments at Sintra, Portugal, will fan fears that central banks will keep pushing rates higher and 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 fears for the world economy have been tempered by signs China is pushing back against investors’ pessimism, stepping up support for its currency on Tuesday. State-owned newspaper China Securities Journal said Tuesday 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.
The yen, meanwhile, hovered around 143.50 versus the dollar, having fallen almost 10% so far this year versus the dollar. The weakness has caused concern in Tokyo which extended the term of its top currency official Masato Kanda for another year, in a move that underscores determination to stem weakness in the currency.
Oil prices extended gains on back of optimism over Chinese stimulus and uncertainty over Russian crude output following a weekend mutiny by Yevgeny Prigozhin, leader of the Wagner mercenary group.
Investors will focus on US data on business-equipment orders, home sales and consumer confidence later in the day for a snapshot of the economy.
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
The Stoxx Europe 600 was little changed as of 9:40 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.3%
The MSCI Emerging Markets Index rose 0.5%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.3% to $1.0937
The Japanese yen fell 0.2% to 143.76 per dollar
The offshore yuan rose 0.3% to 7.2186 per dollar
The British pound rose 0.1% to $1.2731
Cryptocurrencies
Bitcoin rose 0.7% to $30,379.86
Ether rose 1.4% to $1,876.7
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.74%
Germany’s 10-year yield advanced one basis point to 2.32%
Britain’s 10-year yield advanced three basis points to 4.33%
Commodities
Brent crude rose 0.6% to $74.63 a barrel
Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar and Anchalee Worrachate.
Source: Bloomberg