Bulls piled back into global stock markets, encouraged by an easing in Sino-US tensions and growing confidence that the Federal Reserve will be able to slow its rate hiking pace.
As Treasury yields and the dollar slipped, index futures on the Nasdaq 100 jumped more than 1%, boosted also by hefty gains earlier across Asian technology companies. Chipmakers Advanced Micro Devices Inc., Nvidia Corp. and Intel Corp. rose between 1.3%-2% in US premarket trading, while Tesla Inc., Amazon.com Inc., Apple Inc., and Alphabet Inc. all added about 1% each.
Europe’s Stoxx 600 index fluctuated just above flat, though the market is close to a three-month high and Germany’s Dax index is on the cusp of a technical bull-market, having narrowly missed that milestone on Monday. In Asia, Hong Kong’s Hang Seng benchmark rose above that threshold, gaining as much as 4.2%.
Markets have turned risk-on in recent days, trading off a softer-than-expected US data print that many reckon will allow the Fed to raise rates in 50 basis-point increment, after three 75 basis-point hikes. That view was encouraged by Vice Chair Lael Brainard who said on Monday it would probably be “appropriate soon to move to a slower pace of increases.”
“The issue the market has to wrestle with is how long is the Fed going to keep rates at that level and I think there is some positive sentiment out there that the Fed is going to pivot sometime in 2023,” Peter Kraus, Chairman and CEO at Aperture Investors, told Bloomberg Television.
Chinese technology stocks were among the top contributors to gains in the MSCI Asia Pacific Index. Taiwan Semiconductor Manufacturing Co. surged as much as 9.4% after Warren Buffett took a stake of about $5 billion in the chipmaker.
On currency markets, the dollar fell against a basket of currencies, touching its lowest since August 18, while 10-year Treasury yields also slipped. Data showing Japan’s economy unexpectedly shrank in the third quarter, as well as softer- than-expected Chinese retail sales figures, highlighted risks for global growth.
Bank of America’s global fund manager survey for November showed sentiment remains “uber-bearish,” with investors still crowded into the dollar and cash, while tech stocks remain unpopular.
“My biggest concern is the market gets ahead of itself and we get into a situation where the Fed feels it needs to rein in, and tighten more than it otherwise would have, as markets became too frothy,” Kristina Hooper, chief global strategist at Invesco said on Bloomberg Radio.
Concerns over the near-term demand outlook hit oil prices, taking US crude futures down 2% on the day.
Key events this week:
- Former US President Donald Trump plans to make an announcement, Tuesday
- US empire manufacturing, PPI, Tuesday
- US business inventories, cross-border investment, retail sales, industrial production, Wednesday
- Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
- ECB President Christine Lagarde speaks, Wednesday
- Eurozone CPI, Thursday
- US housing starts, initial jobless claims, Thursday
- Fed’s Neel Kashkari, Loretta Mester speak, Thursday
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 10:05 a.m. London time
- Futures on the S&P 500 rose 0.8%
- Futures on the Nasdaq 100 rose 1.2%
- Futures on the Dow Jones Industrial Average rose 0.5%
- The MSCI Asia Pacific Index rose 2%
- The MSCI Emerging Markets Index rose 2.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.8% to $1.0406
- The Japanese yen rose 0.5% to 139.15 per dollar
- The offshore yuan was little changed at 7.0358 per dollar
- The British pound rose 0.7% to $1.1833
Cryptocurrencies
- Bitcoin rose 2.6% to $16,806.85
- Ether rose 2.8% to $1,260.7
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.81%
- Germany’s 10-year yield declined four basis points to 2.11%
- Britain’s 10-year yield was little changed at 3.36%
Commodities
- Brent crude fell 1% to $92.23 a barrel
- Spot gold rose 0.3% to $1,777.05 an ounce
Volatility
- VIX slid 0.72% to 23.56
- VIXmain slid 2.09% to 24.85