Stocks rise, dollar falls as risk tone improves: Markets pull back

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(Bloomberg) – European and U.S. equity futures rose on Tuesday along with Asian stocks amid a positive change in risk sentiment following recent declines in global equities.

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A gauge of Asian stocks was on track for its first advance in seven days, buoyed by a rally in Hong Kong-listed tech stocks as China’s central bank boosted support for the yuan. Contracts for European stocks pointed to likely gains as investors awaited a speech from Christine Lagarde at the European Central Bank forum in Sintra, Portugal.

US futures gained around 0.3%, shaking off Monday’s weakness which saw the Nasdaq 100 tumble 1.4% after suffering its worst week since March as the Federal Reserve feared the US economy could falter. plunged into recession.

The offshore yuan advanced after China set its daily benchmark rate for the managed currency higher than expected for a second day. An indicator of dollar strength fell about 0.2% as the Australian currency, which is sensitive to growth prospects in China, led the gains against the greenback.

The yen, meanwhile, continued to hover around 143.50 against the dollar, a level that raised concerns in Tokyo. Japan has extended the term of its chief currency official, Masato Kanda, for another year in a move that underscores its determination to stem the currency’s weakness.

US government bonds stabilized on Tuesday after the unwinding of bets that the Federal Reserve would cut interest rates this year.

Lagarde’s remarks will be scrutinized by traders who are increasingly concerned that central banks determined to extinguish inflation will continue to push rates higher and risk toppling fragile economies. His peers from the United States, Japan and the United Kingdom are expected to speak at the same forum later this week.

Traders also finally gave in on their bets that the Fed would cut rates this year after Chairman Jerome Powell warned last week that the United States may need one or two more rate hikes in 2023.

“I’m not sure we’ve felt the full effect of the whole inflation cycle,” Nancy Daoud, private wealth adviser at Ameriprise Financial Services, told Bloomberg Television. “These rate hikes are very, very likely in July and early fall.”

Back in Asia, a positive sign emerged in US-China relations from a report that US Treasury Secretary Janet Yellen plans to travel to Beijing in early July for the first high-level economic talks with her new Chinese counterpart He Lifeng. Still, the Biden administration expects an executive order to be ready as soon as July that would regulate and potentially ban certain U.S. investments in China.

“There’s a lot to do when it comes to Chinese markets and that’s something global investors should re-examine,” Geoffrey Lunt, head of Asia investment specialists at HSBC Asset Management, told Bloomberg Television. . “Over the next three, five years, many investors will make a lot of money from Chinese stocks.”

Oil edged higher on Tuesday after a choppy session following the armed uprising in Russia, a major OPEC+ producer. Gold also advanced.

In a late night televised address, Putin condemned the leaders of the Wagner mercenary group as traitors to Russia. The comments did little to clarify the mystery surrounding the weekend’s events or the fate of Wagner chief Yevgeny Prigozhin, who the Kremlin said had agreed to travel to Belarus and avoid prosecution.

Key events this week:

  • U.S. New Home Sales, Durable Goods, Conference Board Consumer Confidence, Tuesday

  • U.S. wholesale inventories, goods trade balance, Wednesday

  • Fed to release results of annual banking sector stress test on Wednesday

  • Policy panel with Christine Lagarde of the ECB, Fed Chairman Jerome Powell, Kazuo Ueda of the BOJ and Andrew Bailey of the BOE speak on Wednesday

  • Eurozone economic confidence, consumer confidence, Thursday

  • US GDP, first jobless claims, Thursday

  • Atlanta Fed President Rafael Bostic speaks on Thursday

  • China Manufacturing PMI, Non-Manufacturing PMI, Balance of Payments, Friday

  • U.S. personal income and spending, University of Michigan consumer sentiment, Friday

Some of the major movements in the markets:

Shares

  • S&P 500 futures rose 0.3% at 7:30 a.m. London time. The S&P 500 fell 0.45%

  • Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 1.4%

  • Japan’s Topix fell 0.3%

  • Australia’s S&P/ASX 200 rose 0.6%

  • Hong Kong’s Hang Seng rose 2.0%

  • The Shanghai Composite rose 1.3%

  • Euro Stoxx 50 futures rose 0.5%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro rose 0.2% to $1.0926

  • The Japanese yen was little changed at 143.56 per dollar

  • The offshore yuan rose 0.4% to 7.2121 to the dollar

  • The Australian dollar rose 0.6% to $0.6716

  • The British Pound rose 0.2% to $1.2743

Cryptocurrencies

  • Bitcoin rose 0.3% to $30,262.5

  • Ether rose 0.8% to $1,865.72

Obligations

  • The yield on 10-year Treasury bills rose one basis point to 3.73%

  • The Japanese 10-year rate rose two basis points to 0.370%

  • Australia’s 10-year yield fell two basis points to 3.93%

Goods

  • West Texas Intermediate crude rose 0.7% to $69.85 a barrel

  • Spot gold rose 0.2% to $1,926.69 an ounce

This story was produced with assistance from Bloomberg Automation.

–With help from Jason Scott and Abhishek Vishnoi.

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