US futures signal bounce after 3-week slump: Markets wrap

(Bloomberg) – US stock futures rose on Monday, signaling a rebound for stocks on Wall Street after what has been a cruel month for investors so far in August. Bonds were broadly weaker.

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Contracts for the S&P 500 and Nasdaq 100 gained at least 0.5%, with underlying indicators expected to moderate three-week declines. Palo Alto Networks Inc. rallied in premarket trading after the cybersecurity firm’s billing forecast beat estimates. European stocks rebounded from a six-week low as higher energy prices boosted oil producers like TotalEnergies SA and Shell Plc.

Government bond yields continued to rise, moving over the curve. The 10-year maturity climbed to its highest level since November 2007, while the 30-year maturity was near the 2011 highs.

The rebound in stock markets follows a series of sharp falls, with the S&P 500 falling 4.8% this month as investors brace for the possibility of interest rates rising for longer. The next indication of the policy outlook will come from this week’s annual central bankers’ meeting in Jackson Hole, Wyoming, where Federal Reserve Chair Jerome Powell will speak on Friday.

Confusion over China’s policy approach to stemming the country’s real estate downturn kept more upbeat sentiment in check. Chinese lenders on Monday cut their benchmark one-year lending rate by 10 basis points and left five-year lending rates unchanged, even after policymakers called for more lending. Traders had expected both interest rates to be cut by 15 basis points.

“I believe there is more volatility ahead as the market is unhappy with the lack of stimulus in China and especially the availability of credit for consumers,” said Evgenia Molotova, senior investment manager at Pictet Asset Management. “The narrative in the US is increasingly leaning toward a soft landing. The risk here is a possible rebound in inflation due to strong consumer spending and wage increases.”

The story goes on

According to Bloomberg Economics’ Anna Wong, Powell’s Friday speech is expected to “take a more balanced tone in Wyoming, signaling the end of the tightening cycle while underscoring the need to keep rates high for longer.”

“The Fed did almost everything it needed to do to bring inflation down to target, and I’d be surprised if there were many more rate hikes,” said David Henry, investment manager at Quilter Cheviot.

In terms of earnings, the biggest event of the week is Wednesday’s report from Nvidia Corp., the chipmaker whose revenue forecast was blown and fueled this year’s rally in artificial intelligence-related stocks.

Meanwhile, two top Wall Street strategists are at odds over the outlook for US stocks as debate rages on whether the economy can avoid a recession. Morgan Stanley’s Michael Wilson — a staunch stock bearer — says sentiment is likely to weaken further as investors begin to “question the sustainability of economic resilience.” But his colleague at Goldman Sachs Group Inc., David Kostin, says there is scope for investors to further increase exposure if the economy stays on a soft-landing path.

Wilson said stock investors have now become overly optimistic about a soft landing, while slowing inflation has constrained US companies’ ability to raise prices. Kostin said the recent drop in a Goldman stock sentiment indicator could prove short-lived if market conditions continue to improve.

In other individual stock moves, Nikola Corp. in U.S. premarket trading on Monday after the company sold investors $325 million in convertible bonds and recalled 209 vehicles. Napco Security Technologies Inc. fell more than 30% after the maker of electronic security devices announced it would have to adjust three-quarters of its financial reports.

In the energy markets, benchmark European gas prices rose by as much as 18% as traders priced in the possibility of supply disruptions from a possible strike in Australia. Oil prices rose for a third day as signs of physical market tightening offset growing demand risks in China and the US. Global benchmark Brent traded above $85 a barrel and is up more than 2% since last Wednesday’s close.

Important events this week:

• US Existing Home Sales, Tuesday

• Austan Goolsbee of the Chicago Fed speaks Tuesday

• Eurozone S&P Global Services & Manufacturing PMI, Consumer Confidence, Wednesday

• UK S&P Global/CIPS UK Manufacturing PMI, Wednesday

• US New Home Sales, S&P Global Manufacturing PM, Wednesday

• US Initial Jobless Claims, Durables, Thursday

• The Kansas City Fed’s annual economic policy symposium in Jackson Hole begins Thursday

• Japan Tokyo CPI, Friday

• University of Michigan consumer sentiment, Friday

• Fed Chair Jerome Powell and ECB President Christine Lagarde address Friday’s conference in Jackson Hole

Some of the key movements in the markets:

Shares

• S&P 500 futures were up 0.5% as of 8:05 a.m. New York time

• Nasdaq 100 futures up 0.7%

• Futures on the Dow Jones Industrial Average rose 0.4%

• The Stoxx Europe 600 rose 0.7%

• MSCI World Index up 0.1%

currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.3% to $1.0909

• The British pound rose 0.2% to $1.2758

• The Japanese yen fell 0.4% to 145.90 per dollar

cryptocurrencies

• Bitcoin fell 0.7% to $26,058.55

• Ether fell 0.9% to $1,674.13

Tie up

• The 10-year government bond yield rose five basis points to 4.30%

• The 10-year German government bond yield rose five basis points to 2.67%

• The 10-year UK government bond yield was little changed at 4.68%

raw materials

• West Texas Intermediate crude rose 1.2% to $82.26 a barrel

• Gold futures were up 0.2% to $1,920.60 an ounce

This story was created with the support of Bloomberg Automation.

– With the support of Tassia Sipahutar.

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