Stocks rise, dollar falls as risk tone improves: Markets wrap

European and US equity futures rose with Asian shares on Tuesday amid a positive shift in risk sentiment following recent declines in global stocks.

A gauge of Asian equities was on course for its first advance in seven days, buoyed by a rally in Hong Kong-listed technology stocks as the China’s central bank stepped up its support for the yuan. Contracts for European stocks pointed to likely gains as investors awaited a speech from Christine Lagarde at the European Central Bank forum in Sintra, Portugal.

US futures gained around 0.3%, shaking off weakness from Monday that saw the Nasdaq 100 fall 1.4% after suffering its worst week since March amid concern that the Federal Reserve will push the US economy into recession.

The offshore yuan advanced after China set its daily reference rate for the managed currency at a stronger-than-expected level for a second day. A gauge of dollar strength fell around 0.2% while the Australian currency, which is sensitive to the growth outlook in China, led the gains versus the greenback.

The yen, meanwhile, continued to hover around 143.50 versus the dollar, a level that has caused concern in Tokyo. Japan extended the term of its top currency official Masato Kanda for another year, in a move that underscores determination to stem weakness in the currency.

US government bonds steadied Tuesday following unwinding of bets that the Federal Reserve will cut interest rates this year.

Lagarde’s remarks will be scrutinised by traders who have been growing more anxious that central banks determined to extinguish inflation will keep pushing rates higher and risk sending fragile economies into reverse. Her peers from the US, Japan and the UK are slated to speak at the same forum later this week.

Traders have also finally relented on their bets that the Fed will cut rates this year after Chair Jerome Powell last week warned the US may need one or two more rate increases in 2023.

“I’m not sure we have felt the full effect of the whole inflation cycle,” Nancy Daoud, private wealth adviser at Ameriprise Financial Services, said on Bloomberg Television. “Those rate hikes are very, very likely in July and in early fall.”

Back in Asia, a positive sign emerged in the US-China relationship from a report that US Treasury Secretary Janet Yellen plans to visit Beijing in early July for the first high-level economic talks with her new Chinese counterpart He Lifeng. Still, the Biden administration expects to have an executive order ready as soon as July that would regulate and potentially bar some US investments in China.

“There is plenty to get your teeth into when it comes to Chinese markets and it is something that global investors should take another look at,” Geoffrey Lunt, head of Asia investment specialists at HSBC Asset Management, said on Bloomberg Television. “Over the next one, three, five years, a lot of investors will make a lot of money out of Chinese equities.”

Oil edged higher on Tuesday after a choppy session following the armed uprising in Russia, a major OPEC+ producer. Gold also advanced.

In a late-night televised speech, Putin condemned leaders of the Wagner mercenary group as traitors to Russia. The comments did little to clarify the mystery around the weekend’s events or the fate of Wagner chief Yevgeny Prigozhin, who the Kremlin said had agreed to go to Belarus and avoid prosecution.

Key events this week:

• US new home sales, durable goods, Conference Board consumer confidence, Tuesday
• US wholesale inventories, goods trade balance, Wednesday
• Fed to unveil results of annual banking industry stress test, Wednesday
• Policy panel with ECB’s Christine Lagarde, Fed Chair Jerome Powell, BOJ’s Kazuo Ueda and BOE’s Andrew Bailey speak, Wednesday
• Eurozone economic confidence, consumer confidence, Thursday
• US GDP, initial jobless claims, Thursday
• Atlanta Fed President Rafael Bostic speaks, Thursday
• China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday
• US personal income and spending, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 7:30 a.m. London time. The S&P 500 fell 0.45%
• Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 1.4%
• Japan’s Topix fell 0.3%
• Australia’s S&P/ASX 200 rose 0.6%
• Hong Kong’s Hang Seng rose 2.0%
• The Shanghai Composite rose 1.3%
• Euro Stoxx 50 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.2% to $1.0926
• The Japanese yen was little changed at 143.56 per dollar
• The offshore yuan rose 0.4% to 7.2121 per dollar
• The Australian dollar rose 0.6% to $0.6716
• The British pound rose 0.2% to $1.2743

Cryptocurrencies

• Bitcoin rose 0.3% to $30,262.5
• Ether rose 0.8% to $1,865.72

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.73%
• Japan’s 10-year yield advanced two basis points to 0.370%
• Australia’s 10-year yield declined two basis points to 3.93%

Commodities

• West Texas Intermediate crude rose 0.7% to $69.85 a barrel
• Spot gold rose 0.2% to $1 926.69 an ounce