(Bloomberg) — US equity futures climbed as signs that lawmakers in Washington will avoid a government shutdown brightened sentiment.
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S&P 500 contracts rose 0.8% as a stopgap funding bill looked set to pass and avoid a US government shutdown. That’s a change in mood after the benchmark index extended its three-week rout beyond 10% on Thursday, the technical threshold for a correction. In Europe, the Stoxx 600 index climbed 0.4%. Kering SA plunged 11% as its choice of designer to oversee a makover at Gucci disappointed investors.
In Asia, the CSI 300 index of mainland China stocks touched the highest level this year, on prospects for more policy support to encourage consumption.
Treasuries gave back some of the gains from the prior session, when investors dashed to haven assets in a move that lifted gold to a record and supported the dollar. Gains for the greenback extended into Friday, strengthening a gauge of the currency for a third day.
The pound weakened Friday after data showed the UK economy unexpectedly shrank at the start of 2025. Gross domestic product fell 0.1% in January, hit by declines in manufacturing and construction. Economists had expected a 0.1% increase.
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Washington lawmakers avoiding a government shutdown would remove an uncertainty for traders, already fretting over threats to US economic growth from President Donald Trump’s tariff war. Two months into Trump’s presidency, sentiment on Wall Street has turned from optimism to nervousness. Wall Street’s slump has erased $5 trillion from US stocks as investors pared risk and some moved money to markets in Europe and Asia.
“It’s a very volatile environment and we expect this to continue in the foreseeable future,” Thomas Taw, head of APAC investment strategy for BlackRock, said on Bloomberg Television. He said equity markets “like Europe and to some extent China,” have emerged as compelling opportunities as US shares have fallen from record highs.
The recent swoon in US stocks is a technical correction rather than the beginning of a new bear market as it’s likely to prompt policy intervention, according to Bank of America Corp.’s Michael Hartnett.
The S&P 500 has plunged 10% into correction territory since a February peak. A bear market is defined as a 20% drop from a recent high.
The BofA strategist, who has preferred international equities over the US this year, recommended buying the S&P 500 at 5,300 points, a drop of a further 4% from current levels, once stock outflows accelerate, fund managers’ cash levels rise above 4% and high-yield spreads approach 400 basis points.
“We say this is a correction, not a bear market in US stocks,” Hartnett wrote in a note. “Since equity bear threatens recession, fresh declines in stock prices will provoke flip in trade and monetary policy.”
Congressional Democrats and Republicans have been engaged in a high-stakes game of chicken over Democrats’ insistence that a spending package include some restraints on Elon Musk’s DOGE’s cost-cutting crusade, with Republicans refusing and daring the opposition party to risk blame for a shutdown. Senate Democratic leader Chuck Schumer dropped his threat to block a Republican spending bill, opening the way to avoid a US government shutdown.
Traders are also tracking prospects for a ceasefire in Ukraine. Russian President Vladimir Putin said he wants to discuss a proposed ceasefire with Trump, though he warned that any truce should lead to a long-term resolution of the war. At the same time, the US is tightening sanctions on Russia by restricting payments for energy even as it pursues peace talks.
Meanwhile, investors are the most bullish on Treasuries relative to stocks for at least three years, as Trump’s tariff policies threaten to end the era of US exceptionalism, the Bloomberg Markets Live Pulse survey showed.
In Asia, consumption stocks drove Chinese shares higher on policy hopes, while banking stocks advanced as investors positioned for a possible reduction in the reserve ratio requirement, which would free up more funds for lending. CK Hutchison Holdings Ltd. plunged Friday after China’s top office dealing with Hong Kong matters reposted a sharp attack on the conglomerate’s decision to appease Trump by selling its stake in Panama ports.
Elsewhere, oil advanced as the US tightened sanctions and gold traded within a whisker of $3,000-an-ounce.
Key events this week:
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.3% as of 8:27 a.m. London time
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S&P 500 futures rose 0.8%
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Nasdaq 100 futures rose 1%
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Futures on the Dow Jones Industrial Average rose 0.6%
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The MSCI Asia Pacific Index rose 0.5%
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The MSCI Emerging Markets Index rose 0.9%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0851
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The Japanese yen fell 0.7% to 148.86 per dollar
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The offshore yuan rose 0.2% to 7.2321 per dollar
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The British pound fell 0.1% to $1.2936
Cryptocurrencies
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Bitcoin rose 2.8% to $82,553.62
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Ether rose 3.2% to $1,900.86
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.29%
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Germany’s 10-year yield advanced two basis points to 2.87%
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Britain’s 10-year yield was little changed at 4.67%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Cheng and Sagarika Jaisinghani.
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