Stocks Surge as China Vow Revives Risk Appetite: Markets Wrap

(Bloomberg) — Stocks surged Wednesday and U.S. and European equity futures rose after China unveiled a more market-friendly policy stance, boosting investor sentiment amid the uncertainty caused by Russia’s war in Ukraine.

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An Asia-Pacific share gauge jumped the most since 2020 and a Chinese tech index soared a record 20%. European futures added 2%, while S&P 500 and Nasdaq 100 contracts also climbed.

China vowed policies to boost financial markets and increase economic growth as it attempted to ease fears on risks related to the property market, overseas listings and internet companies. That touched on many of the concerns that have soured China’s market outlook for some time.

Equities in China and Hong Kong had been under pressure — shedding $1.5 trillion combined over the first two days this week — on regulatory fears and speculation that Beijing’s ties with Russia raise the risk of a U.S. backlash.

“The market was indeed oversold, irrational, in the dramatic rout, so real money is back doing bottom fishing,” said Castor Pang, head of research at Core Pacific Yamaichi.

West Texas Intermediate crude oil rose, while remaining below $100 a barrel. The U.S. 10-year Treasury yield advanced ahead of the Federal Reserve decision. The offshore yuan strengthened and the dollar dipped.

A quarter-point Fed rate increase, the first since 2018, to fight high inflation is widely anticipated but there’s less certainty beyond that. While markets expect a total of seven such moves this year, policy makers also have to factor in growth risks emanating from the war and the isolation of Russia in retaliation.

“The confluence of events leading in to this meeting puts policy makers in a very unenviable position,” Matt Rowe, executive director at Nomura Securities International Inc., said on Bloomberg Television. “It’s being publicly debated whether if you create a recession to push the number down to 2%, is that actually a policy error?” he added, referring to inflation.

In the latest developments from the conflict, Ukraine and Russia are due to resume talks Wednesday. A key adviser to Ukrainian President Volodymyr Zelenskiy called the negotiations “difficult” but said there is room for compromise. In Russia, President Vladimir Putin said Ukraine’s leadership was not “serious” about resolving the conflict.

Russia has begun the process of paying $117 million in interest due Wednesday on dollar bonds. Investors are waiting to see if a default occurs. The coupon payments have a 30-day grace period until any default could potentially be called.

Elsewhere, nickel trading is due to resume on the London Metal Exchange, over a week after being suspended amid a historic short squeeze.

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Here are some key events to watch this week:

EIA crude oil inventory report, Wednesday
FOMC rate decision and Fed Chair Jerome Powell news conference, Wednesday
Bank of England rate decision, Thursday
ECB President Christine Lagarde, Executive Board member Isabel Schnabel, Governing Council member Ignazio Visco and Chief Economist Philip Lane speak at a conference, Thursday
Bank of Japan rate decision, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.6% as of 6:44 a.m. in London. The S&P 500 rose 2.1%
Nasdaq 100 futures rose 1%. The Nasdaq 100 rose 3.2%
Japan’s Topix index added 1.5%
Australia’s S&P/ASX 200 index rose 1.1%
South Korea’s Kospi index climbed 1.4%
Hong Kong’s Hang Seng index increased 8.9%
China’s Shanghai Composite index added 3.5%
Euro Stoxx 50 futures increased 1.9%

Currencies

The Bloomberg Dollar Spot Index fell 0.2%
The euro was at $1.0975, up 0.2%
The Japanese yen was at 118.30 per dollar
The offshore yuan was at 6.3640 per dollar, up 0.3%

Bonds

Commodities

West Texas Intermediate crude was at $98.58 a barrel, up 2.2%
Gold was at $1,915.45 an ounce