Europe, US futures rise; Commodities fall on China: Markets wrap

(Bloomberg) – European and US stock futures rose alongside Asian stocks in a rally tempered by China’s modest economic growth target.

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Gains in Asia were led by Japan and South Korea, where benchmark indices rose about 1%, followed by Wall Street on Friday. US stocks ended the week on high levels, buoyed by speculation that the Federal Reserve will not hike interest rates beyond the highs already priced in.

Stocks shattered previous falls in Hong Kong while those on the mainland stayed lower as investors digested the impact of China’s growth target of just around 5%. Investors took this as a sign that Beijing policymakers are unlikely to deploy large-scale stimulus.

This set the tone for commodities from iron ore to copper, which slipped along with oil on expectations that demand could be weaker than previously expected.

Government bond yields fell in Australia and New Zealand, trailing Treasury movements on Friday as the US 10-year interest rate closed back below the closely-watched 4% level. Treasuries were little changed in Asia on Monday. A measure of the dollar’s strength was faltering after a small rise earlier.

Investors will continue to watch Chinese stock movements closely for clues as to the resilience of the recent bullish momentum seen in the nation and broader across Asia. An indicator for Asian stocks gained 1.5% last week after falling almost 6% in February.

A rally in the S&P 500 on Friday contributed to a three-week losing streak, while the Nasdaq 100 posted its best day since early February. Sentiment remained upbeat despite a report showing the resilience of the services sector, as some investors bet the impact of Fed rate hikes on the economy would be delayed. A measurement of the prices paid by service providers showed that costs were increasing more slowly, which was welcomed by traders.

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“Interest rates are going to be higher for an extended period of time, so we don’t think the strength you’re seeing in the stock market will be sustainable in the second half of the year,” Nadia Lovell, senior US equity strategist at UBS Global Wealth Management, said in one Interviewed by Bloomberg Television. “We think you’re going to see a drag on the economy that’s impacting corporate earnings.”

This week brings a slew of important economic data and events for investors to consider. In Asia, eyes remain on the National People’s Congress in Beijing for more policy announcements and details that could set the tone for how market-friendly — or harsh — regulation will be through 2023. Australia’s interest rate decision will be the focus on Tuesday and Friday comes the latest policy decision from the Bank of Japan under current Governor Haruhiko Kuroda.

Traders around the world will be watching the US nonfarm payrolls report for clues as to whether the economy can withstand further rate hikes. Last week’s data showed continued resilience in the US labor market and bolstered the case that the Fed should stick with its tightening policy, a theme that pushed nearly all major assets into the red in February. Investors will also be glued to their screens as Fed Chair Jerome Powell addresses Senate and House committees this week.

Important events this week:

• US Factory Orders, Commodities, Monday

• US wholesale inventories, consumer credit, Tuesday

• Fed Powell’s semi-annual monetary policy report to the Senate Banking Committee, Tuesday

• Interest rate decision in Australia, Tuesday

• Eurozone GDP, Wednesday

• US MBA Mortgage Applications, ADP Employment Changes, Trade Balance, JOLTS Jobs, Wednesday

• Fed Chair Powell’s semi-annual monetary policy report to the House Financial Services Committee, Wednesday

• Canada interest rate decision, Wednesday

• EIA Crude Oil Inventories, Wednesday

• China CPI, PPI, Thursday

• US Challengers Job Cuts, Initial Jobless Claims, Household Net Worth Change, Thursday

• Bank of Japan interest rate decision, Friday

• US nonfarm payrolls, unemployment rate, monthly budget statement, Friday

Some of the key movements in the markets:

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• S&P 500 futures were up 0.1% as of 2:44 p.m. Tokyo time. The S&P 500 rose 1.6% on Friday

• Nasdaq 100 futures were up 0.3%. The Nasdaq 100 rose 2% on Friday

• Japan Topix Index up 0.8%

• Australia’s S&P/ASX 200 index rose 0.6%

• Hong Kong’s Hang Seng rose 0.3%

• The Shanghai Composite fell 0.2%

• Euro Stoxx 50 futures up 0.4%

currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0644

• The Japanese yen was little changed at 135.74 per dollar

• The offshore yuan fell 0.3% to 6.9159 per dollar

• The Australian dollar fell 0.3% to $0.6752

• The British pound was little changed at $1.2031

cryptocurrencies

• Bitcoin fell 0.6% to $22,358.73

• Ether fell 0.9% to $1,558.43

Bind

• The 10-year government bond yield fell one basis point to 3.94%

• Japan’s 10-year yield was little changed at 0.50%

• Australia’s 10-year yield fell 14 basis points to 3.77%

raw materials

• West Texas Intermediate Crude fell 0.8% to $79.08 a barrel

• Spot gold fell 0.1% to $1,854.09 an ounce

This story was created with the support of Bloomberg Automation.

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