Stocks rally as China factory data lift sentiment: markets wrap

European and US stock futures rose along with Asian shares as China’s manufacturing posted its biggest improvement in more than a decade.

An Asian equity benchmark advanced by the most since mid January, supported by a surge of 4% in Hong Kong’s benchmark index. Futures for the S&P 500, the Nasdaq 100 and Euro Stoxx 50 all erased earlier losses and climbed following data showing the world’s second-biggest economy is rebounding strongly after Covid restrictions were lifted.

Commodity currencies rose, with the Australian dollar rebounding from a loss, while the offshore yuan strengthened by 0.7%. Oil also climbed along with gold.

China’s manufacturing purchasing managers’ index climbed last month to its highest reading since April 2012. The figures come ahead of the country’s annual National People’s Congress, with traders expecting to hear more about Beijing’s economic plans.

“China’s in a relatively good place at the moment relative to other major economies in terms of the easing cycle,” Elizabeth Kwik, Asian equities investment director at abrdn, said on Bloomberg Television. Any growth stimulus signals from the government “will be something good to watch that might come out of the NPC,” she said, referring to the congress.

Wednesday’s rebound marks a reversal from recent weeks, when a re-pricing of peak US rates saw investors sell just about every risk asset. The Hang Seng China Enterprises Index jumped more than 4%, helped by tech and property stocks, rebounding after a loss of 11% in February.

The latest data “should keep the yuan on a firm footing” heading into the event, while “commodity currencies such as the Australian dollar may also be buoyed on expectations of a solid Chinese demand recovery,” said Wei Liang Chang, a strategist at DBS Bank Ltd.

A gauge of dollar strength extended its loss and Treasury yields edged higher.

Bond yields also advanced in Europe on Tuesday after hot inflation data caused a reassessment of rate expectations, picking up a theme has dominated trading in a month that saw the Federal Reserve signal its intention to ratchet rates higher than the market had been anticipating.

Bond traders no longer view the odds of a Fed rate cut this year as better than-even, a shift from what they were expecting just a month ago.  Market expectations also see the European Central Bank raising rates through February 2024, with a 4% ECB terminal rate fully priced.

“For the Fed, they want to make sure that they increase rates and do their job,” Mary Nicola, multi-asset portfolio manager at PineBridge Investments, said on Bloomberg Television. “They could continue to hike but they can continue to hike until it starts hurting and we start seeing cracks in the labor market and that’s where it just becomes a real predicament for the Fed.”

Key events this week:

• Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
• US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
• Eurozone CPI, unemployment, Thursday
• US initial jobless claims, Thursday
• Eurozone S&P Global Eurozone Services PMI, PPI, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 6:50 a.m. London time. The S&P 500 fell 0.3%
• Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.1%
• Japan’s Topix index rose 0.2%
• Hong Kong’s Hang Seng Index rose 4%
• China’s Shanghai Composite Index rose 0.9%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.3% to $1.0611
• The Japanese yen was little changed at 136.26 per dollar
• The offshore yuan rose 0.7% to 6.9063 per dollar

Cryptocurrencies

• Bitcoin rose 2.7% to $23,783.34
• Ether rose 3.3% to $1,658.1

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.95%
• Australia’s 10-year yield declined seven basis points to 3.79%

Commodities

• West Texas Intermediate crude rose 0.8% to $77.63 a barrel
• Spot gold rose 0.5% to $1 836.10 an ounce