(Bloomberg) — European and US equity index futures advanced in line with Asian stocks’ rebound, which was fueled by China’s pledge for fiscal stimulus and gains in technology shares.
Most Read from Bloomberg
European contracts climbed 1%, as equity benchmarks in the tech-heavy markets of Japan and South Korea advanced alongside futures for the Nasdaq 100. A regional Asian equity gauge rose around 2% as China’s top leaders called for sufficient fiscal spending and made the most forceful vow yet to stabilize a property downturn.
While there were no details on the size of the planned fiscal spending, China’s benchmark CSI 300 index gained for a seventh straight session. Asian equities have soared this week after the People’s Bank of China came out with a slew of measures to revive the world’s second-largest economy. Some analysts have questioned whether the monetary stimulus unveiled earlier is enough amid concerns over deflation and weak consumption.
“Asian markets are soaking in an ocean of optimism, thanks to China’s unusual and all-in determination to gear up momentum into the Golden Week and the year-end,” said Hebe Chen, an analyst at IG Markets Ltd. “The region broadly built up the risk-on sentiment following Fed’s rate cut last week.” China’s Golden Week holidays run from Oct. 1-7.
Asian tech stocks outperformed, partly driven by Micron Technology Inc.’s after-hours rally following a strong revenue forecast. Futures for the S&P 500 rose 0.6%, as traders await a pre-recorded address by Federal Reserve Chair Jerome Powell at the 10th annual US Treasury Market Conference.
As part of the stimulus, China is considering injecting up to 1 trillion yuan ($142 billion) of capital into its biggest state banks to increase their capacity to support the struggling economy, Bloomberg reported Thursday, citing people familiar with the matter. Such a move would be the first time since the global financial crisis in 2008 that Beijing has injected capital into its big banks.
“This is a different type of stimulus,” said Hao Hong, chief economist at Grow Investment Group. “If done through special bond issuance, it’s a fiscal stimulus and can stabilize the banks as property prices continue to decline. It will ensure that the banks lending capability won’t be affected.”
Treasury yields were steady after rising across the curve on Wednesday, supporting gains in the dollar, as investors faced an onslaught of new bond supply from an auction of five-year notes. An index of greenback fell after a 0.7% increase Wednesday.
The yen traded at around 145 per dollar after a Wednesday decline against the greenback of more than 1%. Softness in the Japanese currency comes amid signs the Bank of Japan is in no rush to further increase interest rates.
China Stimulus
In a rare announcement of direct aid, Chinese authorities said on Wednesday they will give one-off cash handouts to people in extreme poverty, the state broadcaster CCTV reported Wednesday, without providing details.
The cash handout announcement has investors “wondering whether this will signal a new urgency in Beijing for more direct stimulus, especially in consumption related,” said Wong Kok Hoong, the head of institutional equities sales trading at Maybank Securities Pte. “Personally, I would suggest adding to positions, especially index tracking large-caps: the internet names, tech, and insurance. The rally would probably be broad-based, given how underweight HK/China has been.”
Read: BlackRock’s Jewell Says Stocks Can Cope With Earnings Downgrades
A gauge of Chinese stocks in Hong Kong rose for a 10th consecutive day, the longest winning streak in more than six years.
On Wednesday, Federal Reserve Governor Adriana Kugler said she “strongly supported” the US central bank’s decision last week, adding it will be appropriate to make additional rate cuts if inflation continues to ease as expected.
Going forward, the Fed’s level of success in guiding the US to a soft landing will be important in determining the outlook for other asset classes, said UBS Group AG’s Solita Marcelli.
“The market has been overestimating Fed easing for the last three years and I think probably continues to do so,” said Michael Rosen, chief investment officer at Angeles Investments. “But what’s changed a bit with the 50 basis point move was a willingness by the Fed to move faster, to be more accommodative, to be more receptive to economic conditions, as opposed to just focusing on inflation.”
In commodities, oil was steady after plunging in the previous trading session. West Texas Intermediate, the US oil price, slipped more than 2% on Wednesday to settle below $70 a barrel. Elsewhere, gold traded steady near an all-time high as the weak US data bolstered the case for deeper interest rate cuts.
Key events this week:
-
ECB President Christine Lagarde speaks, Thursday
-
US jobless claims, durable goods, revised GDP, Thursday
-
Fed Chair Jerome Powell gives pre-recorded remarks to the 10th annual US Treasury Market Conference, Thursday
-
China industrial profits, Friday
-
Eurozone consumer confidence, Friday
-
US PCE, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
-
S&P 500 futures rose 0.5% as of 6:39 a.m. London time
-
Nikkei 225 futures (OSE) rose 2.4%
-
Japan’s Topix rose 2.1%
-
Australia’s S&P/ASX 200 rose 0.9%
-
Hong Kong’s Hang Seng rose 2.7%
-
The Shanghai Composite rose 1.8%
-
Euro Stoxx 50 futures rose 0.8%
-
Nasdaq 100 futures rose 1%
Currencies
-
The Bloomberg Dollar Spot Index fell 0.2%
-
The euro rose 0.1% to $1.1147
-
The Japanese yen was little changed at 144.82 per dollar
-
The offshore yuan rose 0.2% to 7.0114 per dollar
-
The Australian dollar rose 0.5% to $0.6856
-
The British pound rose 0.2% to $1.3344
Cryptocurrencies
-
Bitcoin rose 0.1% to $63,575.71
-
Ether rose 1.1% to $2,609.93
Bonds
-
The yield on 10-year Treasuries was little changed at 3.78%
-
Japan’s 10-year yield advanced two basis points to 0.830%
-
Australia’s 10-year yield advanced four basis points to 3.95%
Commodities
-
West Texas Intermediate crude fell 1.4% to $68.69 a barrel
-
Spot gold rose 0.2% to $2,661.25 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
