Equity Futures Point to Gains in Asian Benchmarks: Markets Wrap

2023-06-07 07:26

Asian equity futures pointed to advances around the region on Wednesday, with signs of stimulus in China, a

Asian equity futures pointed to advances around the region on Wednesday, with signs of stimulus in China, a glimmer of hope in geopolitics and hints of more broad-based strength in US shares bolstering sentiment.

A rotation into financial shares Tuesday suggested the breadth of the S&P 500’s recent rally might extend beyond technology soon. While a decline in Apple Inc. crimped gains, the benchmark gauge still rose 0.2%. The KBW Regional Bank index added more than 5% and the Russell 2000 climbed 2.7%.

US-listed Chinese companies rallied 3.8%, helped by news that US Secretary of State Antony Blinken plans to visit China in the coming weeks, and an earlier report that Chinese authorities asked the nation’s biggest banks to lower their deposit rates for at least the second time in less than a year.

Futures for Japanese and Australian shares registered small rises while those for Hong Kong jumped 1.9%. Traders have been on the lookout for more government help to support China’s tepid economic recovery and struggling stocks. Bloomberg Economics expects the People’s Bank of China to lower its one-year benchmark interest rate “as soon as mid-June.”

The small gain on Wall Street still left the S&P 500 just short of a bull market. The mood across global markets has been cautious with some questioning if prices have run up too fast on the hype for artificial intelligence.

“It’s too early to say if this is bottom-fishing or a real bet that the most economically sensitive stocks — many of which are unprofitable — are the place to be,” said Steve Sosnick, chief strategist at Interactive Brokers. “But the outperformance that we saw in RTY on Friday and today is very much worth watching because it could explode the narrowing breadth concerns.”

Still, for a second time in three days, the Russell 2000 beat the tech-heavy Nasdaq 100 by at least 2.5 percentage points. Not since November 2020 have small-cap stocks scored frequent, big wins like this.

Major currencies were confined to narrow ranges early Wednesday. Government bond yields in Australia and New Zealand were fractionally higher.

A Treasury bill auction announcement weighed on short-dated US bonds on Tuesday while the yield on 10-year notes fell two basis points.

In commodities, gold was little changed and oil fell slighty after giving up gains Tuesday off news of Saudi Arabia’s supply cut. Wheat surged after Ukraine said Russian forces blew up a giant dam in the country’s south.

The World Bank said in a report Tuesday the global economy is in a precarious situation as sharp interest-rate hikes hit activity and stir vulnerabilities in lower-income countries. Those fears have suppressed equities.

But with the rate of US inflation still high, traders increasingly expect the Federal Reserve will hold rates steady at its June meeting, while keeping the option for hikes later on open. Former vice-chair Richard H. Clarida also said Tuesday it was unlikely the US central bank will start cutting rates until 2024.

Key events this week:

China forex reserves, trade, Wednesday
US trade, consumer credit, Wednesday
Canada rate decision, Wednesday
EIA crude oil inventory data, Wednesday
Eurozone GDP, Thursday
Rate decisions in India, Peru, Thursday
Japan GDP, Thursday
US wholesale inventories, initial jobless claims, Thursday
China PPI, CPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 7:54 a.m. Tokyo time. The S&P 500 rose 0.2%
Nasdaq 100 futures were little changed. The Nasdaq 100 was little changed
Nikkei 225 futures rose 0.6%
Australia’s S&P/ASX 200 Index futures rose 0.3%
Hang Seng Index futures rose 1.9%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0695
The Japanese yen was little changed at 139.60 per dollar
The offshore yuan was little changed at 7.1284 per dollar
The Australian dollar was unchanged at $0.6671

Cryptocurrencies

Bitcoin rose 0.8% to $27,164.48
Ether rose 0.3% to $1,883.12

Bonds

The yield on 10-year Treasuries declined two basis points to 3.66%
Australia’s 10-year yield was little changed at 3.80%

Commodities

West Texas Intermediate crude fell 0.2% to $71.57 a barrel
Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Isabelle Lee, Carly Wanna and Vildana Hajric.