Sunday, January 16

US futures rise as China bets on calm and cautious mood: markets wind down


US equity futures rose as Chinese signs of possible easing measures outweighed concerns about virus restrictions in Europe. European stocks were boosted by trading activity.

December contracts on the S&P 500 and Nasdaq 100 indexes rose 0.3% each after a cautious week in which the benchmark underperformed the technology measure. Telecom Italia SpA rose as much as 30% after KKR & Co. submitted an offer for the company. Two-year and five-year US government bond yields increased by at least two basis points each. The dollar was stable, while oil erased losses.

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US equities are trading near record highs, outperforming the rest of the world as investors see few alternatives amid rising inflation, bond sell-off episodes and a lingering pandemic undermining the global recovery. Even as sentiment remains on the edge amid expectations of a faster-than-expected decline by the Federal Reserve, Monday brought some joy to traders when China’s central bank dropped language preventing accommodation from the politics.

Investors are also focused on who President Joe Biden will choose as a candidate for Fed chairman between Governor Lael Brainard and incumbent Jerome Powell. Whoever gets elected may have to work hard: US inflation is rising at the fastest rate in decades, and price growth expectations are the highest since 2013.

A trio of Fed policymakers – Vice President Richard Clarida, Governor Christopher Waller, and Federal Reserve Bank of St. Louis President James Bullard – have pointed out that the issue of faster downsizing could be on the table when the Federal Open Market Committee meets in December.

“What we’re likely to see this week is more members of the Fed socializing the idea of ​​a faster QE reduction,” Jason Schenker, president and chief economist of Prestige Economics, said on Bloomberg Television. “If that idea comes out and is repeatedly underlined, it will increase the likelihood that the reduction that was announced in December will be faster than the pace that was announced in early November.”

The European Stoxx 600 indicator advanced for the first time in three days as the deal activity helped allay some of the concerns surrounding the spread of Covid-19. Telecommunications stocks were the best performing group, with Telecom Italia winning from private equity firm KKR’s $ 12.2 billion offering for the company.

Stocks outperformed South Korea on Monday, helped by strong export data, and rose in China, whose central bank signaled possible easing to support a slowing economy.

Treasuries were mixed and the gap between yields at five and 30-year maturities was about the lowest since March 2020. Risk aversion has bolstered bonds as rising European infections push Austria toward a blockade and encourage Germany to tighten restrictions. The curve flattened in part on signs that the Fed might consider a more rapid reduction in its bond-buying program to fight inflation.

For more market analysis, read our MLIV blog.

Here are some of the key events this week:

  • Eurozone, US PMI data Tuesday
  • Reserve Bank of New Zealand rate decision on Wednesday
  • US FOMC Minutes, Consumer Income, Wholesale Inventories, New Home Sales, GDP, Initial Jobless Claims, US Durable Goods, University of Michigan Consumer Sentiment. All wednesday
  • Bank of Korea policy decision on Thursday
  • US Thanksgiving: US Stock and Bond Markets Closed Thursday
  • Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday

Some of the main movements in the markets:

Stocks

  • The Stoxx Europe 600 was up 0.4% at 8:38 am London time.
  • S&P 500 futures rose 0.3%
  • Nasdaq 100 futures rose 0.3%
  • Dow Jones Industrial Average futures rose 0.4%
  • The MSCI Asia Pacific Index fell 0.3%
  • The MSCI emerging markets index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro fell 0.2% to $ 1.1269.
  • The Japanese yen fell 0.1% to 114.15 per dollar
  • The offshore yuan rose 0.2% to 6.3787 to the dollar.
  • The British pound fell 0.2% to $ 1.3427.

Captivity

  • The 10-year Treasury yield changed little to 1.55%.
  • Germany’s 10-year yield changed little to -0.35%
  • Britain’s 10-year yield changed little, at 0.88%.

Raw Materials

  • Brent crude rose 0.5% to $ 79.26 a barrel
  • Spot gold changed little

© 2021 Bloomberg


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