Stocks rose on Monday along with US and European futures as traders took advantage of last week’s selloff and kept a cautious eye on the risks of the delta virus strain and China’s regulatory crackdown. The dollar fell.
MSCI Inc.’s Asia-Pacific stock gauge posted one of its biggest daily rallies this month, led by Japan. Chinese tech stocks rebounded from a prolonged selloff, while South Korea rose as export data indicated resilient global demand. The S&P 500 and the Nasdaq 100 advanced on Friday in lower buying.
Treasury bond yields rose and the dollar fell during the first day of six due to the easing of demand from havens. Investors are also looking ahead to the Jackson Hole symposium on Thursday, which may offer insight into how the Federal Reserve plans to cut bond purchases.
Some of the recent commodity weakness eased, and oil topped $ 63 a barrel. Commodity-linked currencies like the Australian dollar strengthened. Bitcoin recovered $ 50,000 for the first time since mid-May.
How long the recent turbulence in stocks will subside remains an open question. China continues to apply a drastic regulatory crackdown under President Xi Jinping, whose rhetoric this year signals a commitment to closing the country’s huge wealth gap. Meanwhile, the delta variant and the prospect of reduced stimulus from the Federal Reserve have cast doubt on the global economic recovery.
“Markets react to interest rate hikes much more than tapering and we expect a pause between tapering and the first hike, suggesting a takeoff in 2023 and not earlier,” Esty Dwek wrote in a note, Head of Global Market Strategy at Natixis Investment Managers. . The pandemic is still with us and growth will soften in 2022, he added.
Dallas Fed Chairman Robert Kaplan said he is willing to adjust his view that the Fed should start reducing its asset purchase program sooner rather than later if delta stress persists and hurts economic progress. Treasury Secretary Janet Yellen endorsed Jerome Powell for a second term as Fed chairman, a move that could reduce uncertainty about the monetary policy path.
On the virus front, China once again reduced local Covid-19 cases to zero. Australia and New Zealand are reviewing their strategies to eliminate infections. Australian Prime Minister Scott Morrison said his country is highly unlikely to have zero cases again.
Here are some events to watch this week:
- US Markit Manufacturing PMI and Existing Home Sales Monday
- Bank of Korea Policy Decision; Governor Lee Ju-yeol briefing on Thursday
- Fed officials attend Jackson Hole Economic Policy Symposium Thursday through Saturday
- US GDP, Initial Jobless Claims Thursday
- July Personal Income and Expenses in the US Friday. Investors will look at the price index for personal consumption expenditures, an inflation measure that the Fed is closely monitoring.
Some of the main movements in the markets:
- S&P 500 futures rose 0.3% at 7:10 am in London. The S&P 500 rose 0.8% on Friday
- Nasdaq 100 futures were up 0.3%. The Nasdaq 100 rose 1.1%
- Japan’s Topix index rose 1.8%
- Australia’s S & P / ASX 200 Index added 0.4%
- South Korea’s Kospi Index gained 1.2%
- Hong Kong’s Hang Seng Index increased 1.4%
- China’s Shanghai Composite Index gained 1.3%
- Euro Stoxx 50 futures rose 0.8%
- The Japanese yen was at 109.95 to the dollar, down 0.2%.
- The offshore yuan stood at 6.4966 per dollar, up 0.1%.
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro was at $ 1.1716
- The 10-year Treasury yield rose one basis point to 1.27%.
- The yield on Australia’s 10-year bonds increased by around two basis points to 1.10%.
- West Texas Intermediate crude was at $ 63.30 a barrel, up 1.9%
- Gold was at $ 1,785.65 an ounce, up 0.3%.
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