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Stocks gain as Beijing reopens offset rate scare: Markets end

Asian stocks and U.S. equity futures gained on Monday as Beijing reopened further from its Covid restrictions, helping to ease a fragile mood amid concerns over inflation and rising rates. Rose oil.

Japanese stocks reversed their losses, while tech stocks surged in Hong Kong. China stocks rose as the capital edged closer to a return to normal. Australian stocks bucked the trend, falling ahead of a second consecutive interest rate hike expected on Tuesday. S&P 500 and Nasdaq 100 futures rose along with their European counterparts.

Treasury yields stabilized. Stronger-than-expected U.S. hiring data for May suggests the Federal Reserve won’t let go of its rate-hike pace to curb price pressures. The next target is US consumer price data due Friday, which could help indicate whether inflation is peaking. A dollar gauge fell slightly.

Crude oil traded near $120 a barrel after Saudi Arabia signaled demand confidence with a bigger-than-expected price increase in Asia. Meanwhile, the United States is reportedly considering allowing more sanctioned Iranian oil into world markets to counter dwindling Russian supplies. Copper hit its highest level since April on China’s easing of virus restrictions.

Investors fear a restrictive Fed could push the US economy into recession, while lockdowns in China to control virus outbreaks have stifled economic activity and hampered supply chains, adding to worries about the acceleration of inflation.

The easing of Chinese lockdowns will help ease pressures on the supply chain, while intensified policy measures are also boosting optimism about China, according to Diana Mousina, senior economist at AMP Capital. Still, the country’s services activity contracted more than expected in May amid restrictions, she said.

“Positive news about Chinese economic activity and cheaper stock valuations could offer value from a long-term investment perspective, but volatility will remain high in the near term,” Mousina said in a note.

The US jobs report eased some fears that the world’s largest economy is slowing too sharply, but also bolstered the view that the Fed will continue to raise rates to fight inflation. Cleveland Fed Chair Loretta Mester said she would support a half-point hike in September if inflation does not ease. Market-derived odds for a third 50 basis point increase in September are around 85%.

The European Central Bank is expected to announce an end to bond purchases this week and officially kick off the countdown to higher borrowing costs in July, joining global counterparts in tightening monetary policy amid runaway inflation .

“Liquidity is coming out of the market and that means it will impact equity markets,” Charu Chanana, market strategist at Saxo Capital Markets, told Bloomberg Television. “We expect the stock market decline to still have some leeway.”

Elsewhere, the pound edged higher amid risks from a vote of confidence in British Prime Minister Boris Johnson’s leadership.

Key events to watch this week:

  • Reserve Bank of Australia policy decision on Tuesday
  • World Bank’s “Global Economic Prospects” report on Tuesday
  • Reserve Bank of India rate decision on Wednesday
  • OECD Economic Outlook, a bi-annual analysis of key global economic trends and prospects for the next two years. Wednesday
  • European Central Bank rate decision, briefing by Christine Lagarde, Thursday
  • China trade, new yuan loans, money supply, global financing. Thursday
  • US CPI, University of Michigan Consumer Sentiment Friday
  • China CPI, Friday PPI

Some of the major movements in the markets:

Shares

  • S&P 500 futures rose 0.5% at 1:53 p.m. in Tokyo. The S&P 500 fell 1.6% on Friday
  • Nasdaq 100 futures rose 0.7%. The Nasdaq 100 fell 2.7%
  • The Topix index rose 0.3%
  • The Australian S&P/ASX 200 index lost 0.3%
  • The Hang Seng index rose 1.1%
  • The CSI 300 index rose 1.5%
  • Euro Stoxx 50 futures gained 0.7%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%
  • The Japanese yen rose 0.2% to 130.63 per dollar
  • The offshore yuan traded at 6.6594 to the dollar
  • The euro was at $1.0726

Obligations

  • The yield on 10-year Treasury bills was 2.94%
  • The Australian 10-year bond yield was 3.48%

Goods

  • West Texas Intermediate crude rose 0.6% to $119.61 a barrel
  • Gold was at $1,856.46 an ounce

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