Global Stocks Rise as China Rebounds; Dollar Falls: Markets Wrap

(Bloomberg) — A gauge of global equities advanced, led by a rebound in Chinese stocks as nationwide unrest over Covid curbs eased. The dollar and Treasuries fell amid improved sentiment for risk taking.

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Shares rallied in Hong Kong and on the mainland as some investors speculated that the protests may hasten a shift away from Covid-Zero policies. Chinese government health officials were due to hold a briefing at 3 p.m. on the implementation of virus prevention and control measures.

“There is growing speculation there will be an imminent announcement of the end of Covid-Zero policy and that’s driving the positive sentiment,” said Kiyong Seong, lead Asia macro strategist at Societe Generale SA in Hong Kong. “Markets will remain volatile as investors assess any policy shift.”

Traders also took heart from the lifting of China’s multi-year ban on share sales by builders. US futures advanced after the S&P 500 pared its monthly gain during the Wall Street session.

Investors continue to parse comments from Federal Reserve officials, with Fed Bank of St. Louis President James Bullard warning that markets may be underestimating the chances of higher rates. His New York counterpart John Williams noted policymakers have more work to do to curb inflation and Fed Vice Chair Lael Brainard said the string of supply shocks is keeping inflation risks elevated.

A gauge of the dollar fell following two days of gains. The Japanese yen rose, as did an index of emerging-markets currencies.

Global bonds joined US peers in signaling a recession, with a gauge measuring the worldwide yield curve inverting for the first time in at least two decades. Treasury yields saw modest increases across the curve while yields on government bonds also rose in Australia and New Zealand.

Elsewhere in markets, oil extended a rebound from the lowest level in almost a year on speculation that the Organization of Petroleum Exporting Countries and its allies will deepen supply cuts to respond to weakening global demand.

Investors remained focused on developments in China Tuesday, and further ahead to Fed chief Jerome Powell’s speech Wednesday. Many economists expect he’ll cement bets that the Fed will slow its pace of rate increases next month — while reminding Americans that its fight against inflation will run into 2023.

“It’s a decent time to start considering sharpening your pencil and think about what is a good buy right now,” Terri Spath, founder and chief investment officer of Zuma Wealth Management, said on Bloomberg Television. She said that the coming slowdown in the US economy would be mild and that if there’s a shallow recession “we can actually see some bottoms in stocks.”

Stagflation is the key risk for the global economy in 2023, according to investors who said hopes of a rally in markets are premature following this year’s brutal selloff. Almost half of the 388 respondents to the latest MLIV Pulse survey said a scenario where growth continues to slow while inflation remains elevated will dominate globally next year.

Key events this week:

Euro area economic confidence, consumer confidence, Tuesday
US Conference Board consumer confidence, Tuesday
EIA crude oil inventory report, Wednesday
China PMI, Wednesday
Fed Chair Jerome Powell speech, Wednesday
Fed releases its Beige Book, Wednesday
US wholesale inventories, GDP, Wednesday
S&P Global PMIs, Thursday
US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday
BOJ’s Haruhiko Kuroda speaks, Thursday
US unemployment, nonfarm payrolls, Friday
ECB’s Christine Lagarde speaks, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.3% as of 1:17 p.m. Tokyo time. The S&P 500 fell 1.5%
Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 1.4%
Euro Stoxx 50 futures were little changed
Japan’s Topix fell 0.7%
Australia’s S&P/ASX 200 rose 0.2%
The Hang Seng Index rose 3.9%
The Shanghai Composite rose 2.2%

Currencies

The Bloomberg Dollar Spot Index fell 0.4%
The euro rose 0.4% to $1.0379
The Japanese yen rose 0.2% to 138.66 per dollar
The offshore yuan rose 0.9% to 7.1841 per dollar
The Australian dollar rose 0.8% to $0.6702

Cryptocurrencies

Bitcoin rose 0.7% to $16,309.75
Ether rose 1.2% to $1,186.45

Bonds

Commodities

West Texas Intermediate crude rose 1.6% to $78.45 a barrel
Spot gold rose 0.5% to $1,750.85 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth, Richard Henderson and Rik Stevens.