US Index Futures Rise on Tech Rally; Dollar Dips: Markets Wrap

(Bloomberg) -- US equity-index futures gained on Monday as Beijing’s latest move to ease Covid restrictions injected a note of optimism into markets rattled by inflation and rate-hike concerns. Treasuries and the dollar slipped.

Contracts on the tech-heavy Nasdaq 100 and the S&P 500 climbed more than 1%, buoyed by a report that Chinese regulators are set to ease curbs on ride-hailing giant Didi Global Inc. and other US-listed tech firms. Didi’s shares soared as much as 52% in premarket trading. Other tech giants caught the mood: Apple Inc. climbed 1.6%, Tesla rose after tumbling over 9% by the close on Friday, while Amazon.com Inc. edged higher after implementing a 20-for-1 stock split.

Stronger-than-forecast US hiring data for May suggested the Federal Reserve won’t waver from its tightening path to rein in price pressures. But Goldman Sachs Group Inc. economists said the Fed may be able to pull off its aggressive rate-hike plan without tipping the country into recession. The easing of Chinese lockdowns will help abate supply-chain pressures, said Diana Mousina, a senior economist at AMP Capital.

“Positive news around Chinese economic activity and cheaper equity valuations could offer value from a long-term investment perspective, but volatility will remain high in the short-term,” Mousina said in a note. 

Basic resources led an advance in the Stoxx Europe 600 index as copper rose to its highest since April, with sentiment across industrial metals bolstered by China’s gradual reopening. The technology sector outperformed. 

The UK’s equity benchmark climbed more than 1% as traders returned after a four-day break. The pound gained and gilts fell amid speculation Prime Minister Boris Johnson will survive a leadership vote later Monday.

Crude oil held close to $120 a barrel in New York after Saudi Arabia signaled confidence in demand with a larger-than-expected price increase in Asia. Meanwhile, the US was said to be considering allowing more sanctioned Iranian oil onto global markets to counter the decline in Russian supplies.

The US jobs report Friday quelled some concern that the world’s biggest economy is slowing too sharply, but also strengthened the view that the Fed will keep hiking rates to combat inflation. Cleveland Fed President Loretta Mester said she would back a half-point hike in September if inflation isn’t retreating. Market-derived odds for a third 50-basis-point increase in September are about 85%. 

Meanwhile, the European Central Bank is set to announce an end to bond purchases this week and formally begin the countdown to an increase in borrowing costs in July, joining global peers tightening monetary policy in the face of hot inflation. The ECB is planniing to strengthen its support of vulnerable euro-area debt markets if they are hit by a selloff, Financial Times reported. Italian and Spanish bonds gained.

Read: Team Transitory Is Back Warning Big Rate Hikes Are a Big Mistake

Tech stocks and crypto are vulnerable in the era of quantitative tightening, our latest MLIV Pulse survey shows. Read more here.

Key events to watch this week:

• Reserve Bank of Australia policy decision Tuesday
• World Bank’s “Global Economic Prospects” report Tuesday
• Reserve Bank of India rate decision Wednesday
• OECD Economic Outlook, a twice-yearly analysis of major global economic trends and prospects for the next two years. Wednesday
• European Central Bank rate decision, Christine Lagarde briefing, Thursday
• China trade, new yuan loans, money supply, aggregate financing. Thursday
• US CPI, University of Michigan consumer sentiment Friday
• China CPI, PPI Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 rose 1.1% as of 6:58 a.m. New York time
• Futures on the Nasdaq 100 rose 1.5%
• Futures on the Dow Jones Industrial Average rose 0.8%
• The Stoxx Europe 600 rose 0.9%
• The MSCI World index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro was little changed at $1.0727
• The British pound rose 0.5% to $1.2554
• The Japanese yen rose 0.2% to 130.64 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 2.95%
• Germany’s 10-year yield was little changed at 1.27%
• Britain’s 10-year yield advanced two basis points to 2.18%

Commodities

• West Texas Intermediate crude rose 0.5% to $119.48 a barrel
• Gold futures rose 0.3% to $1,855 an ounce

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