European Stocks Set to Rise After Gains in Japan: Markets Wrap

(Bloomberg) — European stocks are poised for gains on the first day of trading in the fourth quarter after a weaker yen boosted Japanese equities.

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Futures for European equities rose during Asian trading hours. The Nikkei 225 index advanced 2%, a day after the benchmark slumped almost 5% following the ruling party’s leadership race. A gauge of Asian equities also gained while US futures pointed to a weaker open. China and Hong Kong are closed for holidays.

The yen weakened against the dollar on Tuesday after Federal Reserve Chair Jerome Powell said the central bank will lower interest rates “over time,” while re-emphasizing that the overall economy remains on solid footing. Markets were also bracing for any effect after Israel said it had begun “targeted ground raids” in Lebanon.

“I still think that global risk assets perform well heading into the end of the year as the macro backdrop and growth prove to be more resilient than previously expected,” said David Chao, a strategist at Invesco Asset Management. “Thus the near-term market narrative has shifted from questions about a slowing US economy to the size and velocity of the Fed’s rate cuts for the rest of the year.”

Asian shares beat US and European peers for the first time since 2022 in the third quarter. Asian assets are now a focal point for global investors preparing for lower US interest rates and a presidential election likely to further shake up financial markets.

China’s markets are on a week-long holiday after the biggest surge in 16 years on Monday. The MSCI China Index beat an emerging-market gauge which excludes the nation’s equities by almost 22 percentage points in September, the biggest margin of outperformance since June 1999, according to data compiled by Bloomberg.

In Japan, shares of trading houses extended gains after Berkshire Hathaway Inc. hired banks for a potential yen bond offering. In other political news, Shigeru Ishiba was essentially confirmed as prime minister Tuesday after the leadership battle had earlier wrong-footed investors betting on more monetary stimulus from his rival.

In Australia, retail sales rose more than expected in August as tax cuts and warmer weather encouraged households to spend more. Australia’s dollar outperformed its major peers on the data. Shares of Australian iron ore miners fell as the metal edged lower, after rising to the highest since early July on Monday.

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In the US, the S&P 500 secured its fourth consecutive quarter of advances — the longest such winning stretch since 2021. The tech-heavy Nasdaq 100 notched a similar run.

“The bull market has survived the year’s historically weakest quarter, the third quarter, and it is likely to remain intact through at least the end of the year, as earnings remain strong, interest rates are moving lower and consumers are still spending,” said Emily Bowersock Hill at Bowersock Capital Partners.

“We expect the fourth quarter to be quite similar to the third quarter – elevated volatility, but with a strong finish,” she added.

In other news, The International Longshoremen’s Association shut down all ports from Maine to Texas on Tuesday, according to a statement from its Facebook page. The affected ports have the combined capacity to handle as much as half of all US trade volumes, and the strike will halt container cargo and auto shipments.

In commodities, oil climbed slightly as investors assessed the risks of a wider conflict in the Middle East.

Key events this week:

• Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins speak Tuesday

• ECB policy makers speaking include Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel on Tuesday

• BOE chief economist Huw Pill speaks Tuesday

• South Korea CPI, S&P Global Manufacturing PMI on Wednesday

• Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday

• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 6:51 a.m. London time

• Nasdaq 100 futures were little changed

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 0.1%

• The MSCI Emerging Markets Index fell 0.1%

• S&P 500 futures were little changed

• Japan’s Topix rose 1.7%

• Australia’s S&P/ASX 200 fell 0.8%

• Euro Stoxx 50 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1140

• The Japanese yen fell 0.5% to 144.28 per dollar

• The offshore yuan fell 0.1% to 7.0166 per dollar

• The British pound was little changed at $1.3378

Cryptocurrencies

• Bitcoin fell 0.1% to $63,717.31

• Ether rose 0.9% to $2,638.3

Bonds

• The yield on 10-year Treasuries was little changed at 3.78%

• Germany’s 10-year yield declined one basis point to 2.12%

• Britain’s 10-year yield advanced three basis points to 4.00%

• Japan’s 10-year yield was unchanged at 0.850%

• Australia’s 10-year yield advanced four basis points to 4.01%

Commodities

• Spot gold rose 0.3% to $2,643.68 an ounce

• West Texas Intermediate crude rose 0.2% to $68.31 a barrel

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott.

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