Stocks Gain With US Futures; Treasuries Steady: Markets Wrap

(Bloomberg) — Stocks in Europe edged higher on Wednesday along with US equity futures as China moved to reopen its borders to the outside world, dismantling the remnants of the Zero Covid policy.

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Basic-resources shares led an advance in the Stoxx Europe 600 index as prices for industrial metals including copper climbed. S&P 500 futures posted a modest gain after the index fell 0.4% on Tuesday. Hong Kong’s Hang Seng Index traded more than 1% higher. Treasury yields ticked lower after Tuesday’s selloff, and a gauge of the dollar was steady.

China’s reopening is spurring investor optimism for a rally in the last trading week of 2022 to cap a brutal year for financial markets. Global equities have lost a fifth of their value, the largest decline since 2008 on an annual basis, and an index of global bonds has slumped 16%. The dollar has surged 7% and the US 10-year yield has jumped to above 3.80% from just 1.5% at the end of 2021.

Reports that China would drop quarantine requirements for inbound visitors and begin issuing passports and Hong Kong travel permits to mainland residents may be a boost for the global economy, but they’re also raising concern about inflation pressures which could prompt the Federal Reserve to maintain tight monetary policy.

“We may get a pivot later on next year from the Fed where they actually start cutting rates, but that’s going to happen when the situation is going to become much more dire than it is now,” Matt Maley, chief market strategist for Miller Tabak + Co., said on Bloomberg TV. “If we just have this slow grind lower, the Fed’s going to keep interest rates at high levels even if they stop raising rates in any kind of way.”

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China’s reopening also buoyed the outlook for oil, which remained close to a three-week high, and came as Russia imposed some restrictions on crude exports to foreign buyers that adhere to a price cap.

Iron ore surged to its highest since early August, while copper gained in New York. Gold traded flat after edging above $1,800 an ounce in Tuesday trade.

Key events this week:

• US initial jobless claims, Thursday

• ECB publishes economic bulletin, Thursday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.2% as of 8:25 a.m. London time

• S&P 500 futures rose 0.3%

• Nasdaq 100 futures rose 0.3%

• Futures on the Dow Jones Industrial Average rose 0.3%

• The MSCI Asia Pacific Index fell 0.1%

• The MSCI Emerging Markets Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0642

• The Japanese yen fell 0.4% to 134.00 per dollar

• The offshore yuan fell 0.1% to 6.9747 per dollar

• The British pound rose 0.1% to $1.2039

Cryptocurrencies

• Bitcoin fell 0.3% to $16,640.58

• Ether fell 1.3% to $1,194.96

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.83%

• Germany’s 10-year yield declined four basis points to 2.48%

• Britain’s 10-year yield advanced 12 basis points to 3.75%

Commodities

• Brent crude fell 0.9% to $83.55 a barrel

• Spot gold fell 0.5% to $1,804.73 an ounce

This story was produced with the assistance of Bloomberg Automation.

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