Stocks rise after US deal, traders await Powell: Markets wrap

US stock futures advanced along with Asian equities after a deal was reached on the weekend to avoid an American government shutdown. Traders are waiting to hear Federal Reserve Chief Jerome Powell’s remarks for any clues on how much further rates will need to rise.

Futures contracts on the S&P 500 raced higher Monday after US lawmakers late on Saturday passed compromise legislation to keep the government running until November 17. Japanese stocks rose, while a number of Asian markets including China and South Korea were shut for holidays.

Investors also found a measure of relief after data over the weekend showed China’s manufacturing activity expanded for the first time in six months, adding to signs some parts of the nation’s economy are finding a footing again. South Korea reported a slower decline in exports.

“Financial markets were bracing for a shutdown, so there’s an element of relief, but it’s only a temporary lifting of one of the clouds hanging over the markets now,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “Interest rates and Fed hawkishness remain the name of the game and the main driver of the markets over the next few weeks.”

While markets are gaining some relief from the US deal, attention will quickly shift to Powell as he speaks in a discussion later Monday. US manufacturing activity and jobs data will also be in the spotlight this week after the head of the New York Fed said Friday policymakers should leave interest rates high for some time.

“The higher-for-longer rates, the tighter fiscal policy going forward, the higher bond yields, at least in the short term, will all come to roost and impact the economy and cause a slowdown, a recession probably in the first half of 2024,” Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp., said on Bloomberg Television, referring to the US economy.

A gauge of dollar strength was little changed. Treasury yields climbed across the curve, with those on 10-year debt rising four basis points to 4.61%. Five-year yields rose by a similar amount to 4.66% to close in on a 16-year high again.

The Bank of Japan announced it will conduct additional buying operation for government bonds on Wednesday. The 10-year bond futures trimmed losses on the notice and the yen remained weak at around 149.8 per dollar.

Earlier the government bonds fell and stocks were boosted after Japan’s quarterly Tankan survey showed confidence among large manufacturers picked up more than expected, and a summary of the central bank’s policy meeting last month showed signs that officials were more positive about considering revising policy.

Meanwhile, stock gains on the first trading day of October may put a temporary stay on a torrid period for global financial markets. Elevated interest rates made the July-to-September quarter the worst for MSCI’s all-country stock index since September 2022 as surging oil prices added fears over inflation and slowing economic growth.

Elsewhere, oil rose on speculation global demand is running ahead of supply.

Key events this week:

• China has week-long holiday
• Bank of England policy maker Catherine Mann speaks on monetary policy, Monday
• Fed Chair Jerome Powell and Philadelphia Fed President Patrick Harker participate in a roundtable discussion, Monday
• New York Fed President John Williams moderates discussion on climate risk, Monday
• Cleveland Fed President Loretta Mester speaks on economic outlook, Monday
• US ISM manufacturing index, Monday
• Australia rate decision, Tuesday
• Atlanta Fed President Raphael Bostic speaks on economic outlook and inflation, Tuesday
• August US JOLTS report, Tuesday
• Eurozone services and composite PMIs, Wednesday
• ECB President Christine Lagarde gives welcome address at conference, Wednesday
• US ISM services index, Wednesday
• France industrial production, Thursday
• BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
• San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
• Germany factory orders, Friday
• September US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.6% as of 1:17 p.m. Tokyo time. The S&P 500 fell 0.3% on Friday
• Nasdaq 100 futures rose 0.8%. The Nasdaq 100 was little changed
• Japan’s Topix index rose 0.4%
• Australia’s S&P/ASX 200 Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0570
• The Japanese yen fell 0.3% to 149.79 per dollar
• The offshore yuan fell 0.2% to 7.3042 per dollar
• The Australian dollar fell 0.4% to $0.6410

Cryptocurrencies

• Bitcoin rose 3.5% to $28,073.26
• Ether rose 3.2% to $1,727.6

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.61%
• Japan’s 10-year yield advanced one basis point to 0.775%
• Australia’s 10-year yield advanced three basis points to 4.49%

Commodities

• West Texas Intermediate crude rose 0.3% to $91.08 a barrel
• Spot gold fell 0.2% to $1 844.30 an ounce