China’s support measures direct stocks to commodities: market recap

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(Bloomberg) – China’s latest economic support measures boosted equities and commodities on Tuesday, with European stocks getting a further boost on signals that policy tightening in the euro zone could affect at its end.

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

S&P 500 and Nasdaq 100 futures edged higher, though they struggled to gain momentum after Federal Reserve officials reiterated the need for further tightening in their year. Treasury yields fell and a dollar gauge fell for a third day.

While central bank officials in Europe and the United States suggested they had reached a turning point in the fight against inflation, they also warned that higher rates for longer were needed to ensure price stability. — a mixed blessing for stock bulls in the second-quarter earnings season. approaches. Measures taken by China to support its ailing real estate sector – and the hope that more are to come – are also helping to boost morale.

In the UK, data showed wage growth held steady at a level that Bank of England Governor Andrew Bailey says is fueling inflation, keeping pressure on interest rates higher. The data is crucial in shaping the central bank’s next rate decision in August. The pound hit its highest level against the dollar since April 2022.

Villeroy’s comments come ahead of an ECB decision on July 27 that is almost certain to feature a quarter-point rate hike. Policymakers are debating whether to raise borrowing costs again at their next meeting in September.

Most Fed policymakers plan to raise rates an additional half a point by the end of the year, according to projections released after their June meeting.

A gauge of Asian stocks soared more than 1% with the biggest gains in Hong Kong, South Korea and Taiwan. State-run financial newspapers in China published reports on Tuesday signaling the likely adoption of more policies to support ownership, as well as measures to boost business confidence.

Asian chip stocks rose after Taiwan Semiconductor Manufacturing Co. reported better-than-expected sales and U.S. peers climbed on Monday. European stock futures rose, while US stock futures were little changed after the S&P 500 index climbed 0.2% on Monday.

China’s economic problems come at a time when many other countries are facing a different problem: stubbornly high inflation and rising interest rates. During Monday’s session on Wall Street, traders sifted through remarks from a slew of Federal Reserve speakers as they await Wednesday’s Consumer Price Index data that will help determine the way to rate hikes.

There could be more headwinds for the S&P 500 as earnings warnings and higher interest rate fears combine to threaten U.S. stocks, according to the latest Markets Live Pulse survey. Earnings season kicks off in earnest on Friday, when JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report their numbers.

“The surge in government bond yields last week has put some pressure on equities – and underscores that companies will need to meet market expectations for earnings at the start of the second quarter reporting season,” they said. writes BlackRock Investment Institute analysts, including Jean Boivin, in a note. “Resilient consumers have helped support incomes, but we’re seeing them deplete savings built up during the pandemic this year.”

Elsewhere, iron ore and other metals rose along with crude oil on hopes China’s stimulus will support demand. Gold has changed little.

Key events this week:

  • St. Louis Fed President James Bullard speaks on Tuesday

  • Canadian rate decision, Wednesday

  • Bank of England Governor Andrew Bailey speaks on Wednesday

  • US CPI, Wednesday

  • Federal Reserve releases Beige Book on Wednesday

  • Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday

  • China Trade Thursday

  • Eurozone industrial production, Thursday

  • US initial jobless claims, PPI, Thursday

  • American University of Michigan Consumer Sentiment Friday

  • US banks kick off earnings on Friday

Some of the major movements in the markets:

Shares

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

  • S&P 500 futures rose 0.1%

  • Nasdaq 100 futures rose 0.2%

  • Dow Jones Industrial Average futures are 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 to the 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

Obligations

  • The yield on 10-year Treasury bills fell two basis points to 3.97%

  • Germany’s 10-year yield fell two basis points to 2.62%

  • The UK 10-year yield was little changed at 4.63%

Goods

  • Brent rose 0.6% to $78.16 a barrel

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

This story was produced with assistance from Bloomberg Automation.

—With help from Jason Scott.

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