(Bloomberg) — China-linked shares were set to rise on Wednesday ahead of key economic data, while U.S. stocks climbed to new highs after investors maintained their view that the Federal Reserve will cut interest rates this year.
Most read articles on Bloomberg
Benchmark futures contracts in China and Hong Kong rose after mainland stocks and a benchmark of U.S.-listed Chinese shares rose on Tuesday. The S&P 500 rose for a sixth straight trading day, its longest gain since January, while the Nasdaq 100 also set a new record. Japanese and Australian stock contracts were signaling declines early Wednesday.
Short-term Treasuries outperformed as investors believed they would likely benefit from easier policy. Fed Chairman Jerome Powell was careful not to lay out a timeline for rate cuts in comments to lawmakers on Tuesday, but he highlighted growing signs of a cooling in the job market after government data showed the unemployment rate rose for a third straight month.
“Today’s comments continue to prime the market for a rate cut later this year,” said Michael Feroli at JPMorgan Chase & Co. “On the economy, Powell largely played by the playbook, with many of the questions centered on the Basel endgame, not the economy.”
In Asia, traders’ attention on Wednesday will turn to the release of Chinese consumer and producer prices. The Reserve Bank of New Zealand is expected to keep interest rates on hold in its latest decision today.
In his comments, Powell said regulators were close to agreeing to changes to a plan that would require big banks to significantly raise capital, a major win for Wall Street institutions. The reforms are linked to Basel III, an international agreement enacted after the 2008 financial crisis, and are intended to prevent bank failures and new financial crises.
U.S. Treasuries pared losses with a robust sale of $58 billion in three-year notes, but a sell-off in European bonds kept the market in check. Swaps traders continue to expect two rate cuts in 2024.
Currencies remained quiet, with the dollar strength gauge remaining range bound and the yen weakening slightly against the US dollar. The emerging market currency index was little changed on Tuesday.
Treasury Secretary Janet Yellen said the labor market is no longer driving inflation in the U.S. economy as much as it did early in the recovery from the pandemic, reiterating earlier comments by Powell.
Tech Rally
Wall Street is historically biased toward the technology sector, raising the risk that the artificial intelligence-driven stock rally will stall, with valuations skyrocketing and earnings growth expected to slow going forward.
That adds uncertainty to investors betting big tech companies will continue to rally, warning of “sluggish momentum, narrowness and complacency” in the market, according to Lisa Shalett, a senior adviser in Morgan Stanley’s asset management division.
The rally in artificial intelligence stocks shows few signs of slowing, but historical validation suggests it’s time to take profits on the big names, according to strategists at Citigroup Inc. led by Drew Pettit. Sentiment toward AI stocks is the strongest it’s been since 2019, and most of these companies are expected to generate more free cash flow than analysts expect, they say.
In commodity markets, West Texas Intermediate crude oil was up slightly early Wednesday, while gold was little changed.
Major events this week:
-
China producer price index, consumer price index, Wednesday
-
Rep. Jerome Powell will testify before the House Financial Services Committee on Wednesday.
-
Federal Reserve Board members Austan Goolsbee, Michelle Bowman and Lisa Cook speak Wednesday
-
U.S. Consumer Price Index, Initial Jobless Claims Thursday
-
Federal Reserve Presidents Raphael Bostic and Alberto Mussallem to speak Thursday
-
China trade, Friday
-
University of Michigan Consumer Sentiment Index, U.S. Producer Price Index, Friday
-
Citigroup, JPMorgan and Wells Fargo to report earnings on Friday
Some of the key market developments:
stock
-
Nikkei 225 futures were down 0.2% as of 7:23 a.m. Tokyo time.
-
S&P 500 futures little changed
-
Hang Seng futures rose 0.6%
-
S&P/ASX 200 futures down 0.5%
currency
-
The Bloomberg Dollar Spot Index was little changed.
-
The euro was little changed at $1.0815.
-
The Japanese yen was almost unchanged at 161.27 yen to the dollar.
-
The offshore yuan was little changed at 7.2885 per dollar.
Cryptocurrency
-
Bitcoin fell 0.2% to $57,815.09.
-
Ether fell 0.3% to $3,061.63.
merchandise
This story was produced with assistance from Bloomberg Automation.
Most read articles on Bloomberg Businessweek
©2024 Bloomberg LP
