(Bloomberg) — Global stocks attempted to recover after two weeks of losses sparked by concern that continued policy tightening by the US Fed and other central banks would trigger economic recession and hit companies’ profits.
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While the S&P 500 and the tech-heavy Nasdaq 100 are on track to end the month lower, futures on both ticked higher. In Europe, gains in the Stoxx 600 were led by energy and miners after Chinese leaders pledged to revive consumption and support the private sector.
Markets are evaluating how much damage central banks’ policy tightening cycle could inflict on the economy. While inflation is showing signs of peaking, rate-setters, from the Federal Reserve to the European Central Bank, have hammered home the message they are nowhere near done with rate hikes.
Yields on US Treasuries edged higher, as did those on UK and German government bonds. The yield on Japan’s benchmark five-year note touched the highest level in more than seven years on speculation that a shift might be on the horizon for Japan’s ultra-easy monetary regime.
Meanwhile, Morgan Stanley analysts warned the coming earnings recession could prove similar to the 2008/2009 downturn, while in 2023, “price declines for equities will be much worse than what most investors are expecting.”
On currency markets, the dollar slipped against a basket of currencies as money markets amped up bets on rate hikes elsewhere. The euro strengthened 0.6% following a string of hawkish comments from rate-setters. The yen rose on the possibility of an exit from Japan’s yield-curve control policy or higher target for the 10-year government bond yield.
Among the biggest risers in US premarket trading was electric vehicle maker Tesla Inc., which surged almost 5% after a Twitter users’ poll appeared to suggest billionaire Elon Musk should step down as head of the social media site.
Musk has said he will abide by the poll’s result. While the survey is yet to close, Musk exiting Twitter could benefit Tesla, which has slumped 57% this year amid concerns that his chaotic takeover of Twitter has distracted him from Tesla.
Traders are also keeping an eye on a surge of Covid infections in China and a pledge by the nation’s top leaders to focus on boosting the economy next year. That hinted at business-friendly policies, providing further support for the property market while likely scaling back fiscal stimulus.
Beijing’s pledge to revive consumption and the US move to refill strategic crude reserves boosted oil futures, though economic growth fears kept prices on track for a second monthly loss.
Key events this week:
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China loan prime rates, Tuesday
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Bank of Japan interest rate decision, Tuesday
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US housing starts, Tuesday
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EIA Crude Oil Inventory Report, Wednesday
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US existing home sales, US Conference Board consumer confidence, Wednesday
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US GDP, initial jobless claims, US Conf. Board leading index, Thursday
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US consumer income, new home sales, US durable goods, PCE deflator, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.3% as of 4:48 a.m. New York time
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Nasdaq 100 futures rose 0.3%
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Futures on the Dow Jones Industrial Average rose 0.2%
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The Stoxx Europe 600 rose 0.3%
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index fell 0.4%
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The euro rose 0.5% to $1.0643
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The British pound rose 0.6% to $1.2225
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The Japanese yen rose 0.5% to 135.94 per dollar
Cryptocurrencies
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Bitcoin was little changed at $16,754.4
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Ether rose 0.2% to $1,184.81
Bonds
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The yield on 10-year Treasuries advanced five basis points to 3.53%
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Germany’s 10-year yield advanced four basis points to 2.20%
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Britain’s 10-year yield advanced 11 basis points to 3.44%
Commodities
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West Texas Intermediate crude rose 0.9% to $74.93 a barrel
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Gold futures rose 0.4% to $1,807.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar.
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