Global equities trimmed a weekly loss as Chinese shares surged amid signs that authorities are trying harder to ease the impact of its Covid-Zero policy. Treasuries were little changed before US payrolls data.
(Bloomberg) — Global equities trimmed a weekly loss as Chinese shares surged amid signs that authorities are trying harder to ease the impact of its Covid-Zero policy. Treasuries were little changed before US payrolls data.
Miners led gains in Europe as commodities rallied, while luxury stocks also got a boost. Hong Kong’s benchmark Hang Seng Index was set for the biggest weekly jump since 2011 and US futures advanced, with US-listed Chinese stocks surging in premarket trading.
Investors were heartened by news that US audit officials were ahead of schedule in on-site inspections of Chinese companies, and that a system penalizing airlines for bringing virus cases into the country may be scrapped.
Focus will turn to US payrolls data later on Friday for clues on the strength of the labor market and pace of Federal Reserve tightening. A key segment of the Treasury curve reached an extreme of inversion not seen since the 1980s on Thursday, an anomaly that historically preceded economic downturns.
“Today’s numbers need to be viewed in the light of other labor market statistics that shows labor demand holding up,” said Stuart Cole, head macro economist at Equiti Capital. “The concerns over still strong inflationary pressures will be trumping any meaningful easing that the labor market might be pointing to.”
Swaps that reference future Federal Reserve meetings indicate an expected peak policy rate above 5.14% around mid-2023.
“Our view has been for a while that the only way central banks can credibly tame inflation is through tighter financial conditions and slower growth,” Barclays analysts wrote in a note. “Chairman Powell made it clear that over tightening may be a less costly option over the long run than doing too little. So as it stands, we find few reasons to stop worrying about a hard landing.”
The Nasdaq 100 was poised to trim its biggest weekly drop since the start of the year, a slump driven by rate-hike concerns, amid optimism about China’s reopening. China’s CSI 300 Index capped its best week since mid-2020.
The dollar weakened, while the offshore yuan advanced.
The rally follows days of speculation on the back of unverified social media posts detailing a reopening plan. While similar Chinese rallies have all fizzled in recent months, bulls are now betting that some of the world’s lowest valuations have left the nation’s shares primed to surge on any hint of good news.
Elsewhere, European gas and power prices jumped after Electricite de France SA issued yet another warning about its troubled nuclear fleet, adding to pressure on the region’s tight energy supplies this winter.
Key events this week:
- US nonfarm payrolls, unemployment, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 1.1% as of 9:55 a.m. London time
- Futures on the S&P 500 rose 0.7%
- Futures on the Nasdaq 100 rose 0.7%
- Futures on the Dow Jones Industrial Average rose 0.5%
- The MSCI Asia Pacific Index fell 1.6%
- The MSCI Emerging Markets Index fell 1.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.3% to $0.9779
- The Japanese yen rose 0.3% to 147.81 per dollar
- The offshore yuan rose 0.9% to 7.2690 per dollar
- The British pound rose 0.6% to $1.1222
Cryptocurrencies
- Bitcoin rose 1.7% to $20,583.54
- Ether rose 2.5% to $1,579.53
Bonds
- The yield on 10-year Treasuries was little changed at 4.14%
- Germany’s 10-year yield was little changed at 2.25%
- Britain’s 10-year yield declined three basis points to 3.49%
Commodities
- Brent crude rose 2.1% to $96.69 a barrel
- Spot gold rose 1% to $1,645.31 an ounce
–With assistance from Sujata Rao, Tassia Sipahutar and Brett Miller.
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