Stocks extended a rebound and major currencies rallied versus the dollar amid the UK’s efforts to foster greater stability in its volatile bond market.
(Bloomberg) — Stocks extended a rebound and major currencies rallied versus the dollar amid the UK’s efforts to foster greater stability in its volatile bond market.
A gauge of Asian equities advanced Tuesday, led by technology stocks in Hong Kong. US equity futures jumped as much as 2% after the S&P 500 closed above a key technical support level on Monday.
A Bloomberg gauge of the greenback declined for a second day as the New Zealand dollar surged on rate-hike bets and the pound fluctuated following a Financial Times report that the Bank of England was likely to delay the sale of government bonds.
The yen paused in its run toward the closely watched 150 per dollar level, which has investors on high alert for possible intervention. Japanese Finance Minister Shunichi Suzuki said he was watching market moves with a sense of urgency.
Chinese junk dollar bonds dropped to a record low, as a property crisis sparked by a crackdown on excessive borrowing and a slide in home sales show few signs of turning around without more policy steps.
China’s decision to delay the publication of key economic data including third-quarter gross domestic product added a touch of caution to trading in the region. The Communist Party congress has provided few signs of a let up in China’s Covid-zero and property-market policies that are weighing on the economy.
Treasury yields declined during Asian trading, as did rates on Australia’s benchmark bonds. Government bond yields in New Zealand bucked the trend, rising with the country’s currency after inflation data remained stronger than expected. The figures underscored risks to markets from persistently high consumer prices even in countries at the vanguard in tightening monetary policy.
The latest US recession probability models by Bloomberg economists Anna Wong and Eliza Winger forecast a higher probability of such an event across all time frames — with the 12-month estimate of a downturn by October 2023 hitting 100%. That’s up from 65% for the comparable period in the previous update.
Amid debate about when stocks might find a bottom, Morgan Stanley’s Mike Wilson wrote that the rout which took the S&P 500 to test a “serious floor of support” could lead to a technical recovery. The strategist, who’s one of Wall Street’s most-prominent bearish voices, said he “would not rule out” the measure rising to about 4,150. That’s 13% above current levels.
By contrast, JPMorgan Chase & Co.’s Marko Kolanovic was trimming risk allocations in the bank’s model portfolio as he grew more cautious about economic and market recoveries.
Despite the turmoil seen in UK markets, institutions like the Treasury are still strong and credible, according to Philipp Hildebrand, vice chairman of BlackRock, Inc.
“Hopefully the new chancellor can bring stability back into the marketplace and then the government can focus on a growth strategy that is focused on the supply side as opposed to simply stimulating demand,” he said on Bloomberg Television.
Elsewhere in markets, oil rose as investors weighed signs of a tight market against concerns over a global economic slowdown. Gold edged higher and Bitcoin continued to trade below $20,000.
Key events this week:
- US industrial production, NAHB housing market index, Tuesday
- Fed’s Neel Kashkari speaks, Tuesday
- Euro area CPI, Wednesday
- EIA crude oil inventory report, Wednesday
- US MBA mortgage applications, building permits, housing starts, Fed Beige Book, Wednesday
- Fed’s Neel Kashkari, Charles Evans, James Bullard speak, Wednesday
- US existing home sales, initial jobless claims, Conference Board leading index, Thursday
- Euro area consumer confidence, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 futures rose 1.5% as of 6:59 a.m. London time. The S&P 500 rose 2.7% Monday
- The Nasdaq 100 futures added 1.7%. The Nasdaq 100 rose 3.5%
- Euro Stoxx 50 futures were up 1%
- Japan’s Topix index gained 1.1%
- Hong Kong’s Hang Seng Index was up 1.2%
- China’s Shanghai Composite Index fell 0.1%
- The S&P/ASX 200 Index climbed 1.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.1% to $0.9854
- The Japanese yen rose 0.1% to 148.89 per dollar
- The offshore yuan rose 0.1% to 7.1992 per dollar
- The British pound was little changed at $1.1356
Cryptocurrencies
- Bitcoin rose 0.1% to $19,552.96
- Ether rose 0.2% to $1,332.06
Bonds
- The yield on 10-year Treasuries fell four basis points to 3.98%
- Australia’s 10-year bond yield dropped 10 basis points to 3.92%
Commodities
- West Texas Intermediate crude rose 0.8% to $86.11 a barrel
- Spot gold rose 0.4% to $1,656.34 an ounce
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
