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Dollar declines; China tech leads stocks rebound: markets wrap

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The dollar and Treasury yields fell as investors adjusted positions ahead of the Federal Reserve’s policy meeting while Chinese technology stocks led a rebound in equities during the Asian trading session.

A gauge of the region’s shares rallied for a second day, with large gains in Hong Kong-listed internet companies after the Hang Seng Index on Monday slumped to the lowest since 2009. Technology and EV battery companies pushed South Korea’s benchmark index higher.

US equity futures advanced after the S&P 500 declined, weighed down by big tech. US energy shares had whipsawed on news that President Joe Biden would call on Congress to consider tax penalties for producers accruing record profits.

Australian government bond yields reversed earlier gains and the nation’s stocks climbed after the central bank raised interest rates by a quarter point as expected. The small increase in Australia’s policy rate contrasts with projections for another jumbo hike from the Federal Reserve on Wednesday.

While Treasury yields slid, they remained elevated. Swap markets are pricing in a 75-basis-point hike this week amid the Fed’s most-aggressive tightening campaign in four decades.

The strong rebound in Chinese stocks likely reflected “some bottom fishing,” said Banny Lam, head of research at CEB International Investment Corp. “The markets might be volatile in the coming days, however, as investors are waiting for Fed comments about rate outlook.”

Strategists including JPMorgan Chase & Co.’s Marko Kolanovic believe the Fed’s aggressive hiking is nearing an end, providing the prospect of relief for markets. The US will likely raise rates by 50 basis points in December and pause after one more 25-basis-point hike in the first quarter, he said.

Indicators such as the inversion of the yield curve between 10-year and three-month Treasuries “all support a Fed pivot sooner rather than later,” wrote Morgan Stanley’s Michael Wilson.

Looking ahead, Bespoke Investment Group said November has historically been one of the strongest months of the year for US stocks. The S&P 500 has experienced an average gain of 0.82% with positive returns 69% of the time, according to data going back to 1983. Over the last 10 years, the gauge saw a median advance of 1.26% and gains nine out of 10 times.

The Bloomberg Dollar Index snapped a three-day rising streak.

The yen strengthened slightly while remaining within reach of the 150 level versus the dollar. Japan spent a record 6.3 trillion yen ($42 billion) in October to counter the yen’s sharp slide against the dollar, as it tried to limit speculative moves adding to pressure on the currency.

Elsewhere, oil climbed above $87 a barrel after losing around 3% over the previous two sessions. Gold rose.

Key events this week:

  • US construction spending, ISM manufacturing index, Tuesday
  • EIA crude oil inventory report, Wednesday
  • Federal Reserve rate decision, Wednesday
  • US MBA mortgage applications, ADP employment, Wednesday
  • Bank of England rate decision, Thursday
  • US factory orders, durable goods, trade, initial jobless claims, ISM services index, Thursday
  • ECB President Christine Lagarde speaks, Thursday
  • US nonfarm payrolls, unemployment, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.6% of 2:50 p.m. in Tokyo. The S&P 500 fell 0.8% on Monday
  • Nasdaq 100 futures rose 0.7%. The Nasdaq 100 fell 1.2%
  • Euro Stoxx 50 futures rose 0.8%
  • The Topix Index rose 0.4%
  • The Hang Seng Index rose 4.1%
  • The Shanghai Composite Index rose 1.3%
  • Australia’s S&P/ASX 200 Index rose 1.7%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.4%
  • The euro rose 0.4% to $0.9924
  • The Japanese yen rose 0.3% to 148.20 per dollar
  • The offshore yuan rose 0.6% to 7.2912 per dollar

Cryptocurrencies

  • Bitcoin rose 0.7% to $20,540.78
  • Ether rose 1.7% to $1,591.64

Bonds

  • The yield on 10-year Treasuries declined two basis points to 4.03%
  • Yields on Australia’s 10-year bonds were little changed at 3.76%

Commodities

  • West Texas Intermediate crude rose 1.1% to $87.48 a barrel
  • Spot gold rose 0.5% to $1 641.53 an ounce

© 2022 Bloomberg

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