Stocks rise in volatile trading ahead of Powell: markets wrap

Stocks rose Wednesday after a volatile open in Asia as investors weighed Covid developments in China and awaited a speech from Federal Reserve Chair Jerome Powell.

Hong Kong’s equities benchmark dropped initially, quickly reversed course and then made gains in choppy trading as the day progressed.

Australian shares erased early losses after inflation eased and Japan’s market remained in the red following data that showed a sharper-than-expected decrease in industrial production.

US and Europe futures edged higher after stocks on Wall Street closed down and ahead of the speech by Powell on the economy and the labor market. Investors will be on the lookout for further signs that the next Fed interest rate hike will step down to 50 basis points.

Treasuries rose fractionally while a dollar gauge declined. The offshore yuan fluctuated after China’s factory and services activity contracted further in November as record Covid cases prompted widespread movement curbs.

Amid the turmoil, an index of global stocks was on course for a second monthly advance, which has trimmed its loss so far this year to about 18%. Bonds were also poised for a monthly gain, along with losses for 2022 on a near par with equities.

The lockstep moves in stocks and bonds brought their correlation this week to highest level since 2012, which has heaped pressure on investors seeking to hedge risk by splitting their portfolios between the two asset classes.

The declines in equities on Wall Street Tuesday were led technology companies. A slump in Amazon shares followed a large debt offering from the retailing giant.

A series of investment grade debt deals was one factor that lured investors from Treasuries, which fell in the US, sending yields higher.

Oil rose for a third day Wednesday after industry data pointed to a substantial draw in US crude stockpiles and investors counted down to an OPEC+ meeting that may see the group agree to cut production.

Gold headed for its biggest monthly gain since May 2021 as the dollar fell on signs the Fed is preparing to slow the pace of interest-rate hikes.

Elsewhere, Bitcoin and other leading crypto assets spiked higher in the Asian trading session.

Key events this week:

• EIA crude oil inventory report, Wednesday
• Fed Chair Jerome Powell speech, Wednesday
• Fed releases its Beige Book, Wednesday
• US wholesale inventories, GDP, Wednesday
• S&P Global PMIs, Thursday
• US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday
• BOJ’s Haruhiko Kuroda speaks, Thursday
• US unemployment, nonfarm payrolls, Friday
• ECB’s Christine Lagarde speaks, Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 rose 0.2% as of 2:53 p.m. Tokyo time. The S&P 500 fell 0.2%
• Nasdaq 100 futures climbed 0.2%. The Nasdaq 100 fell 0.7%
• Euro Stoxx 50 futures rose 0.5%
• The Topix Index fell 0.3%
• The S&P ASX Index rose 0.4%
• The Hang Seng Index rose 0.3%
• The Shanghai Composite Index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.3% to $1.0358
• The Japanese yen rose 0.2% to 138.41 per dollar
• The offshore yuan was little changed at 7.1432 per dollar

Cryptocurrencies

• Bitcoin rose 2.5% to $16,880.15
• Ether rose 4.4% to $1,273.05

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.73%
• Japan’s 10-year yield was unchanged at 0.25%
• Australia’s 10-year yield declined seven basis points to 3.53%

Commodities

• West Texas Intermediate crude rose 0.7% to $78.73 a barrel
• Spot gold rose 0.3% to $1 755.28 an ounce