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Stocks Rise on Outlook for Rate Cuts, Earnings: Markets Wrap

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(Bloomberg) — European stock futures and Asian shares gained after the latest jobs data supported the case for US interest-rate cuts.

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The Euro Stoxx 50 contract climbed 0.2%, while US counterparts posted modest gains after the S&P 500 index closed less than 1% away from its all-time high on Thursday. Hong Kong shares led the gains in Asian stocks, while other regional benchmarks of Japan, South Korea and Australia also advanced.

“There’s quite a bit of upside left for major Big Tech as well as the S&P 500,” said Daniel Yoo, head of global asset allocation for Yuanta Securities Korea, on Bloomberg Television. Earnings growth and even a small decline in US interest rates this year could push stocks to fresh records, he said.

The Hang Seng advanced following news that regulators were considering a proposal to exempt individual investors from paying taxes on dividends earned from Hong Kong stocks bought via Stock Connect. Onshore Chinese stocks fluctuated as investors assessed a report saying US President Joe Biden’s administration is poised to unveil a sweeping decision on China tariffs as soon as next week.

To Doug Ramsey at Leuthold, another 10% gain in the S&P 500 isn’t out of the question, at least statistically. He analyzed 80 years of data on bull-market rallies, focusing on those that happened when unemployment was this low and the economic cycle this mature. If the current rally meets the prior records for length and height, the S&P 500 would end the year at 5,705.

If the economy is slowing, unemployment rising, inflation receding, and the Fed is expected to cut rates, there will be plenty of buyers for US Treasury notes and bonds, according to Joe Kalish at Ned Davis Research.

Treasuries were steady, with the US 10-year yield staying around 4.45%, after support from a successful $25 billion sale of 30-year US bonds.

Initial applications for US unemployment benefits rose last week to the highest level since August, topping estimates, with cooling in the jobs market supporting the case for interest rate cuts. Fed Bank of San Francisco President Mary Daly said rates are currently restraining the economy, but it may take “more time” to return inflation to their goal.

“Time will tell whether it’s a one-off or part of a genuine cooldown in the labor market,” said Chris Larkin at E*Trade from Morgan Stanley. “Investors may have adjusted to the idea of the Fed waiting until September to cut interest rates, but that doesn’t mean they’re comfortable waiting indefinitely.”

India Inclusion

Data set for release in Asia Friday includes industrial output for India and the first-quarter current account balance for China. New loans and money supply data for China may also be released as early as today.

Elsewhere, JPMorgan Chase & Co. said it was on track to include India in its emerging market debt index from June, a move that is expected to drive inflows from global investors. Meanwhile, Oversea-Chinese Banking Corp. offered S$1.4 billion ($1 billion) to buy the remaining stake in Great Eastern Holdings Ltd. that it does not currently own, in an effort to solidify its wealth management leadership position.

Oil extended gains into a third day as key technical levels provided a floor for losses while investors digested a mixed US inventories report. Gold rose after jumping more than 1% on Thursday.

Key events this week:

  • UK industrial production, GDP, Friday

  • ECB publishes account of April policy meeting, Friday

  • US University of Michigan consumer sentiment, Friday

  • Chicago Fed President Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 6:49 a.m. London time

  • Nikkei 225 futures (OSE) rose 0.5%

  • Japan’s Topix rose 0.4%

  • Australia’s S&P/ASX 200 rose 0.5%

  • Hong Kong’s Hang Seng rose 2.1%

  • The Shanghai Composite was little changed

  • Euro Stoxx 50 futures rose 0.3%

  • Nasdaq 100 futures rose 0.1%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0776

  • The Japanese yen fell 0.1% to 155.65 per dollar

  • The offshore yuan was little changed at 7.2277 per dollar

  • The Australian dollar fell 0.2% to $0.6607

  • The British pound was little changed at $1.2518

Cryptocurrencies

  • Bitcoin rose 0.2% to $62,775.29

  • Ether rose 0.3% to $3,030.65

Bonds

  • The yield on 10-year Treasuries was little changed at 4.46%

  • Japan’s 10-year yield was little changed at 0.910%

  • Australia’s 10-year yield declined one basis point to 4.33%

Commodities

  • West Texas Intermediate crude rose 0.8% to $79.89 a barrel

  • Spot gold rose 0.5% to $2,358.67 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from April Ma.

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