Stocks, US futures gain as China Covid cases ease: markets wrap

Asian stocks rose Wednesday amid a China rally sparked by declining Covid cases, which spurred hopes that growth-sapping lockdowns could be loosened. Treasuries were steady ahead of a US inflation report.

Mainland Chinese bourses advanced over 1.5%, while technology stocks rallied in Hong Kong. New infections fell in Shanghai and the city reported none were detected in the community. The cases were instead found in quarantine.

A Wall Street advance Tuesday also brought some respite from this year’s equity rout, which has been fueled by fears of an economic downturn as borrowing costs jump. US and European futures pushed higher.

Treasuries climbed and the dollar dipped as investors parsed Federal Reserve comments on tightening monetary policy. Oil increased to $102 a barrel.

Investors are looking for evidence that the price pressures sapping the global economy are peaking. US data later Wednesday are expected to show inflation moderated in April but stayed above 8%. Disruptions linked to Russia’s war in Ukraine and China’s virus outbreak are stoking the cost of living.

A high US print “will give the Fed license to raise rates even faster” and would be very bad for technology stocks, Ellen Hazen, chief market strategist at F.L. Putnam Investment Management Co., said on Bloomberg Television.

Fed outlook

Fed officials reinforced Chair Jerome Powell’s message that half-point hikes are on the table in June and July. But Cleveland Fed President Loretta Mester told Bloomberg Television that “we don’t rule out 75 forever,” referring to a more aggressive, three-quarter-point increase.

The “bar is low” for a surprise from the US inflation data amid ebbing consumer sentiment, according to Brent Schutte, chief investment strategist at Northwestern Mutual Life Insurance Co.

“Things are going to be just a bit better at the margin,” he said. “The Fed overall is going to tighten less. That will lead to a market that begins to find its feet and move higher in coming quarters as inflation does come off the boil.”

Elsewhere, Ukraine and Russia clashed over natural gas sent via pipelines to Europe in a spat that could disrupt supplies. Prices for the commodity jumped.

Here are key events to watch this week:

• US CPI, Wednesday
• EIA crude oil inventory report, Wednesday
• San Francisco Fed President Mary Daly speaks, Thursday
• US PPI, initial jobless claims, Thursday
• University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.5% as of 7:20 a.m. in London. The S&P 500 rose 0.2%
• Nasdaq 100 futures rose 0.9%. The Nasdaq 100 rose 1.3%
• Japan’s Topix index fell 0.6%
• Australia’s S&P/ASX 200 index rose 0.2%
• South Korea’s Kospi index shed 0.1%
• Hong Kong’s Hang Seng Index added 1.6%
• China’s Shanghai Composite Index increased 1.4%
• Euro Stoxx 50 futures rose 1.1%

Currencies

• The Bloomberg Dollar Spot Index dipped 0.1%
• The euro was at $1.0545, up 0.2%
• The Japanese yen was at 130.31 per dollar, up 0.1%
• The offshore yuan was at 6.7463 per dollar

Bonds

• The yield on 10-year Treasuries shed three basis points to 2.96%

Commodities

• West Texas Intermediate crude rose 2.8% to $102.53 a barrel
• Gold was at $1 841.65 an ounce, up 0.2%