Stocks and futures rise as mood improves; Falling dollar

Stocks in Europe gained on Monday along with U.S. equity futures as Beijing’s latest move to ease COVID restrictions injected a note of optimism into markets rocked by inflation and rising fears. rate. Treasuries and the dollar slipped.

Basic resources led the Stoxx Europe 600 index as copper rose to its highest level since April as sentiment on industrial metals was bolstered by China’s gradual reopening. Tech stocks outperformed, following gains from their Asian counterparts after the Wall Street Journal reported that Chinese regulators were set to ease restrictions on ride-hailing giant Didi Global Inc. and other tech companies listed in the United States. Nasdaq 100 futures jumped 1.4% and Didi shares soared as much as 52% in premarket trading.

The benchmark UK equity index climbed more than 1% as traders returned after a four-day break. The pound gained and the gilding fell amid speculation that Prime Minister Boris Johnson will survive a leadership vote later on Monday.

Stronger than expected US hiring data for May suggests that the Federal Reserve will not deviate from its tightening trajectory to contain price pressures. But economists at Goldman Sachs Group Inc. said the Fed may be able to implement its aggressive rate hike plan without tipping the country into recession. Easing Chinese lockdowns will help ease pressures on the supply chain, said Diana Mousina, senior economist at AMP Capital.

“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.

Brent crude oil held steady at around US$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.

The US jobs report eased some concerns that the world’s largest economy was 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 . The central bank is expected to step up its commitment to support vulnerable euro zone debt markets if they are hit by a sell-off, the Financial Times reported. Italian bonds gained.

“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.”

Tech stocks and crypto are vulnerable in the era of quantitative easing, according to our latest MLIV Pulse survey. Learn more here.

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

  • The Stoxx Europe 600 rose 0.9% at 10:30 am London time
  • S&P 500 futures rose 1%
  • Nasdaq 100 futures rose 1.4%
  • Dow Jones Industrial Average futures rose 0.8%
  • The MSCI Asia Pacific index rose 0.6%
  • The MSCI Emerging Markets Index rose 1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%
  • The euro rose 0.2% to reach US$1.0745
  • The Japanese yen rose 0.1% to 130.74 per dollar
  • The offshore yuan was little changed at 6.6506 per dollar
  • The British pound rose 0.6% to reach US$1.2568

Obligations

  • The yield on 10-year Treasury bills rose two basis points to 2.96%
  • Germany’s 10-year yield rose two basis points to 1.29%
  • The UK 10-year yield rose four basis points to 2.20%

Goods

  • Brent rose 0.2% to US$119.92 a barrel
  • Spot gold little changed

Garland K. Long