Stocks, Futures Rise as Traders Weigh China Risks: Markets Wrap

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(Bloomberg) — European stocks and U.S. index futures rose as investors assessed whether global growth can withstand a slowdown in China and a global energy crunch.

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December contracts on the S&P 500 Index advanced 0.3% after a three-day rally for the underlying gauge. Treasury yields were steady as traders braced for a series of speeches by Federal Reserve policy makers this week. Tightening supplies boosted oil, as West Texas Intermediate crude tested the $75-per-barrel level. Iron ore to copper extended a rebound.

Even as China Evergrande’s debt crisis festers, data due this week may show a manufacturing recovery in the world’s second-largest economy is faltering. A developing energy crisis threatens to crimp global growth further at a time markets are preparing for a tapering of Fed stimulus. The week could see volatile moves as traders scrutinize central bankers’ speeches, including Chair Jerome Powell’s meetings with Congressional panels.

“Most bad news come from China these days,” Ipek Ozkardeskaya, a senior analyst at Swissquote Group Holdings, wrote in a note. “The Evergrande debt crisis, the Chinese energy crackdown on missed targets and the ban on cryptocurrencies have been shaking the markets, along with the Fed’s more hawkish policy stance last week.”

The euro slipped against the dollar as the German election failed to produce a clear winner, raising concerns of a prolonged decision on the leadership of Europe’s biggest economy.

Energy and auto stocks sent Europe’s benchmark Stoxx 600 gauge higher. Rolls-Royce extended a rally to the highest since June 2020 after the company was selected to provide the powerplant for the B-52 Stratofortress under the Commercial Engine Replacement Program.

MSCI Inc.’s index of Asian shares edged up. But shares in Shanghai declined as materials stocks dropped on worries that power curbs are hurting manufacturing.

Bitcoin rose modestly and traded around $43,800. Digital currencies plunged Friday as China intensified its push to rein in crypto speculation and mining, but recovered much of the drop over the weekend.

Amid Evergrande developments, the group’s electric-car unit plunged in Hong Kong trading after it warned of a “serious shortage of funds” and scrapped plans to list in Shanghai. Separately, Sunac China Holdings Ltd.’s shares and dollar bonds extended declines, as concerns grew about the developer’s financial health.

Here are some events to watch this week:

  • Fed Chairman Jerome Powell, Treasury Secretary Yellen to testify at a Senate Banking Committee hearing Tuesday

  • European Central Bank President Christine Lagarde speaks Tuesday

  • Japan’s ruling party votes to elect leader, Wednesday

  • Central bank chiefs Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) participate in an ECB Forum panel, Wednesday

  • House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday

  • China Caixin manufacturing PMI, non-manufacturing PMI, Thursday

  • U.S. manufacturing PMI, Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.5% as of 8:41 a.m. London time

  • Futures on the S&P 500 rose 0.3%

  • Futures on the Nasdaq 100 rose 0.2%

  • Futures on the Dow Jones Industrial Average rose 0.4%

  • The MSCI Asia Pacific Index was little changed

  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.1% to $1.1705

  • The Japanese yen was little changed at 110.66 per dollar

  • The offshore yuan was little changed at 6.4614 per dollar

  • The British pound was little changed at $1.3688

Bonds

  • The yield on 10-year Treasuries was little changed at 1.44%

  • Germany’s 10-year yield declined one basis point to -0.24%

  • Britain’s 10-year yield was little changed at 0.93%

Commodities

  • Brent crude rose 1.2% to $79.02 a barrel

  • Spot gold rose 0.4% to $1,757.62 an ounce

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