Stocks in Asia and US equity futures extended their advance as weak US manufacturing data damped bets on the Federal Reserve’s hawkishness.
The MSCI Asia Pacific Index rallied more than 2% to head for its highest in a week, sparked by a broad rebound in the region. Japan’s Topix stock benchmark jumped more than 3%, boosted by technology shares.
Treasuries climbed across the board, with the yield on the 10-year note extending declines after sliding 19 basis points on Monday. Stocks and US government bonds got a new lease of life after a disappointing US manufacturing report prompted traders to unwind bets for continued aggressive tightening by the Fed. The dollar fell.
Australia’s central bank surprised investors by raising interest rates by a quarter percentage point — ending a streak of outsized increases and sending the nation’s currency and government bond yields tumbling.
In the latest sign the Fed’s five rate hikes totaling 3 percentage points may be taking their toll, the Institute for Supply Management’s gauge of factory activity fell to a more than two-year low. The Fed should consider stopping its tightening campaign after one more interest-rate hike in November, according to Ed Yardeni, a market veteran who coined terms like “Fed Model” and “bond vigilante.”
Fed speakers continued the drumbeat over rate hikes. New York Fed President John Williams said the US central bank has yet to raise interest rates to levels that are restricting economic growth, and tightening still has “significant” ways to go.
The Fed will continue to raise rates as it has made it clear that inflation is its number one target, according to Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. “They’re gonna continue to do some things to get it down and I do think it’s gonna cause a recession next year, but I don’t think they’re gonna stop right away,” Landsberg said on Bloomberg Television.
China’s onshore markets will remain shut this week for holidays, while the Hong Kong exchange is closed Tuesday for the Chung Yeung Festival.
Elsewhere, oil traded around $84 per barrel after posting the biggest one-day gain since May as the market looked to OPEC+ to deliver a substantial cut in supply.
Brazilian assets soared after President Jair Bolsonaro secured his way to a runoff election against Luiz Inacio Lula da Silva as investors cheered on the incumbent’s better-than-expected showing and bet his leftist challenger will be forced to moderate his stances in the second stretch of the race. The real was the best-performing among the world’s major currencies Monday.
Key events this week:
- Eurozone PPI, Tuesday
- US factory orders, durable goods, Tuesday
- Fed’s John Williams, Lorie Logan, Loretta Mester, Mary Daly speak at events, Tuesday
- Eurozone services PMIs, Wednesday
- OPEC+ meeting begins, Wednesday
- Fed’s Raphael Bostic speaks, Wednesday
- The Reserve Bank of New Zealand meets, Wednesday
- Eurozone retail sales, Thursday
- US initial jobless claims, Thursday
- Fed’s Charles Evans, Lisa Cook, Loretta Mester speak at events, Thursday
- US unemployment, wholesale inventories, nonfarm payrolls, Friday
- BOE Deputy Governor Dave Ramsden speaks at event, Friday
- Fed’s John Williams speaks at event, Friday
Some of the main moves in markets:
- S&P 500 futures added 1% as of 6:58 a.m. London time. S&P 500 Index rose 2.6% Monday
- Nasdaq 100 futures climbed 1.2%. Nasdaq 100 Index advanced 2.4% Monday
- Japan’s Topix index rose 3.2%
- South Korea’s Kospi index surged 2.5%
- Australia’s S&P/ASX 200 Index gained 3.8%
- The Bloomberg Dollar Spot Index was down 0.2%
- The euro was up 0.2% to 0.9845 per dollar
- The Japanese yen dropped 0.2% to 144.81 per dollar
- The offshore yuan climbed 0.7% to 7.0547 per dollar
- The British pound advanced 0.3% to 1.1328 per dollar
- The yield on 10-year Treasuries fell almost two basis points to 3.62%
- Australia’s 10-year yield dropped 17 basis points to 3.73%
- Bitcoin climbed 0.1% to $19,619
- Ether rose 0.1% to $1,325
- West Texas Intermediate crude rose 0.4% to $83.97 a barrel
- Gold was up 0.2% to $1 702.73 per ounce
© 2022 Bloomberg