China Stocks Eye Gains; S&P 500 Steady On Powell – BusinessToday

China Stocks Eye Gains; S&P 500 Steady On Powell – BusinessToday

Shares in Australia opened lower and Japan’s were steady Wednesday while Chinese futures pointed to gains ahead of key economic data after fresh highs of US equities.

Gains for Hong Kong futures contracts followed a Tuesday advance for mainland stocks and a gauge of US-listed Chinese shares.

The S&P 500 advanced for a sixth consecutive session, its longest winning streak since January, as traders held to bets the Federal Reserve will cut rates this year. The Nasdaq 100 also set a fresh record.

Fed chief Jerome Powell was careful not to offer a timeline for rate cuts in comments to lawmakers on Tuesday. However, he emphasized mounting signs of a cooling job market after government data showed a third straight month of rising unemployment. Australian bonds fell in early trading, echoing moves in long-dated Treasuries. Shorter-term Treasuries outperformed Tuesday on bets they would more likely benefit from policy easing.

The rhetoric “continued to move toward preparing the market for a cut in rates later this year,” said Michael Feroli at JPMorgan Chase & Co. “Powell largely stuck to the script when it came to the economy.”

In Asia, Japan’s largest banks called on the Bank of Japan to make deep cuts to its monthly bond purchases during hearings of market participants at the central bank, according to people who attended.

Elsewhere, the Reserve Bank of New Zealand is expected to hold interest rates in its decision today. Traders will also be watching for the release of consumer and producer prices for China. Bond traders are getting ready for China to start pushing back on record-low yields, with the central bank now armed with “hundreds of billions” of yuan of securities at its disposal to sell.

Investors will also keep a keen eye on China Vanke Co. after the homebuilder warned that losses grew substantially in the second quarter.

In his comments, Powell said regulators are close to agreeing to change their plan to force big banks to hold significantly more capital – a major win for Wall Street lenders. The overhaul is tied to Basel III, an international accord that followed the 2008 financial crisis and is intended to prevent bank failures and another crunch.

Treasuries pared losses after a solid $58 billion sale of three-year notes, though a rout in European bonds kept a lid on the market. Swap traders continued to project two rate cuts in 2024.

Currencies held to muted moves. A gauge of dollar strength was rangebound, while the yen was flat after weakening against the greenback Tuesday. An index of emerging markets currencies was little changed Tuesday.

Treasury Secretary Janet Yellen said the labor market is no longer driving inflation in the US economy to the extent it was earlier in the pandemic recovery, echoing earlier comments by Powell.

Tech Rally

Wall Street has tilted toward the tech sector to a historic degree, raising the stakes should the artificial intelligence-fueled rally falter. Valuations are stretched, while earnings growth is poised to slow from here.

That adds to uncertainty for investors betting that Big Tech’s rally will continue, according to Lisa Shalett at Morgan Stanley’s wealth management unit, who warns of “stretched momentum, weak breadth and complacency” in the market.

The rally in artificial-intelligence stocks may show little sign of flagging, but a historical review suggests it’s time to take profit in the biggest names, according to strategists at Citigroup Inc. led by Drew Pettit. Sentiment toward AI-exposed equities is the strongest since 2019 and free cash flow at the bulk of those firms is forecast to outstrip analyst expectations, they said.

In commodities, West Texas Intermediate crude edged higher early Wednesday while gold was little changed.

Key events this week:

  • China PPI, CPI, Wednesday
  • Jerome Powell testifies to the House Financial Services Committee, Wednesday
  • Fed’s Austan Goolsbee, Michelle Bowman and Lisa Cook speak, Wednesday
  • US CPI, initial jobless claims, Thursday
  • Fed’s Raphael Bostic and Alberto Musalem speak, Thursday
  • China trade, Friday
  • University of Michigan consumer sentiment, US PPI, Friday
  • Citigroup, JPMorgan and Wells Fargo’s earnings, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 9:07 a.m. Tokyo time
  • Japan’s Topix was little changed
  • Australia’s S&P/ASX 200 fell 0.3%
  • Euro Stoxx 50 futures fell 1.6%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was unchanged at $1.0813
  • The Japanese yen was little changed at 161.38 per dollar
  • The offshore yuan was little changed at 7.2904 per dollar

Cryptocurrencies

  • Bitcoin was little changed at $57,872.01
  • Ether fell 0.5% to $3,058.04

Bonds

  • The yield on 10-year Treasuries was little changed at 4.29%
  • Australia’s 10-year yield advanced three basis points to 4.37%

Commodities

  • West Texas Intermediate crude rose 0.3% to $81.66 a barrel
  • Spot gold was little changed

Source: Bloomberg

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