China Support Measures Buoy Stocks to Commodities: Markets Wrap


(Bloomberg) — China’s latest economic support measures buoyed stocks and commodities on Tuesday, with European equities getting an additional lift from signals that policy tightening in the euro area may be near the end.

Most Read from Bloomberg

The Stoxx Europe 600 index is on track for a third day of gains, rising 0.5 at the open with real estate and basic resources leading the advance. The European Central Bank is nearly finished hiking, Governing Council member Francois Villeroy de Galhau said, though he added that interest rates will stay at “high plateau” to ensure they fully impact the economy. Bonds rose, with the German 10-year yield falling three basis points to 2.61%.

Futures on the S&P 500 and Nasdaq 100 edged higher, though they struggled to gain momentum after Federal Reserve officials reiterated the need to tighten further his year. Treasury yields fell and a gauge of the dollar declined for a third day.

While central bank officials in Europe and the US suggested they’ve reached a turning point in the battle against inflation, they also warned higher rates for longer are needed to ensure price stability — a mixed blessing for stock bulls as the second-quarter earnings season approaches. China’s measures to support its ailing real estate sector — and hopes for more to come — are also helping to lift sentiment.

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.

Villeroy’s comments precede an ECB decision on July 27 that is all but certain to feature a quarter-point rate increase. Policymakers are debating whether to raise borrowing costs again at their subsequent meeting in September.

Most Fed policymakers expect to increase rates by a further half percentage point by the end of the year, according to projections released after their June gathering.

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.

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.

3c80a252e1e4e463ebe5e07a5b18a4c5

There may be more headwinds 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, iron ore and other metals rose along with crude oil on hoped China’s stimulus measures will buoy demand. 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

  • The Stoxx Europe 600 rose 0.4% as of 8:21 a.m. London time

  • S&P 500 futures rose 0.1%

  • Nasdaq 100 futures rose 0.2%

  • Futures on the Dow Jones Industrial Average were little changed

  • The MSCI Asia Pacific Index rose 1.1%

  • The MSCI Emerging Markets Index rose 1.3%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro was little changed at $1.1012

  • The Japanese yen rose 0.4% to 140.79 per dollar

  • The offshore yuan rose 0.3% to 7.2041 per dollar

  • The British pound rose 0.2% to $1.2886

Cryptocurrencies

  • Bitcoin fell 0.7% to $30,571.87

  • Ether fell 0.5% to $1,884.04

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 was little changed at 4.63%

Commodities

  • Brent crude rose 0.6% to $78.16 a barrel

  • Spot gold rose 0.3% to $1,930.93 an ounce

This story was produced with the assistance of Bloomberg Automation.

—With assistance from Jason Scott.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.



Source link

About The Author

Scroll to Top