US Futures Rise as Data Shows Softening Economy: Markets Wrap

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(Bloomberg) — US equity futures gained on Wednesday as the latest data showed the US economy expanded at a slower rate than previously thought in the second quarter, fueling speculation the Federal Reserve is nearing the end of its rate-hike cycle. Two-year Treasury yields dipped along with a gauge of the dollar.

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Futures on the S&P 500 and Nasdaq 100 turned higher after the second-print gross deomstic product data. Earlier, a report showed US companies this month added the fewest jobs since March, consistent with recent data showing moderating labor demand.

Among individual movers, HP Inc. slumped almost 10% in premarket trading after the technology hardware company cut its full-year cash flow and profit outlook.

The S&P 500 climbed by the most since June on Tuesday after unexpectedly soft jobs and consumer-confidence readings raised hopes the Federal Reserve may be nearing the end of its tightening cycle. Investors will monitor key non-farm payrolls numbers on Friday to further ascertain the economy’s resilience to high interest rates.

“Data is king right now in terms of market sentiment,” said Susannah Streeter, an analyst at Hargreaves Lansdown Plc. “The non-farm payroll snapshot on Friday will crown the week, and if it points to a fresh slowdown in hiring, we could see another spurt in stock prices.”

European bonds and stocks fell after the latest round of price data suggested inflation may not yet be fully on the retreat in the euro region.

Germany’s 10-year yield jumped as much as seven basis points to 2.58% after reports showed inflation accelerated in four of six German states in August, ahead of figures for the overall German economy due later Wednesday. A separate report showed Spanish inflation also quickened.

Utilities led the decline in the Stoxx Europe 600 dropped, as Orsted A/S plunged more than 20% after the Danish power generator forecast potential impairments of up to $2.3 billion relating to its US portfolio. Among other individual movers, Prudential Plc climbed more than 4% after posting a rise in new business profit.

The German and Spanish inflation data muddied the waters for European policy makers as they approach the September rates decision. Market pricing implies roughly even odds of a quarter-point increase by the European Central Bank to 4%. Further clouding the outlook was data showing that euro-area economic confidence slowed more than anticipated this month.

In Asia, the MSCI Asia Pacific Index came off its highs as the strong rally in Chinese equity markets gradually evaporated. Benchmarks had earlier rallied, with the Hang Seng Index rising as much as 1.4%, after Chinese state-owned lenders were reported to prepare to reduce rates on the majority of outstanding mortgages, as well as on deposits.

“These little piecemeal policy shifts are probably very good in the short term for sentiment, but they don’t necessarily create this sort of surge in terms of the local economy,” Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, said on Bloomberg Television. “There are still bigger issues at play here that I think are holding investors back still at this particular point.”

Elsewhere, the crypto space traded lower after Bitcoin jumped more than 6% in the previous session as a US court ruling potentially paved the way for the country’s first Bitcoin exchange-traded fund.

In commodities, West Texas Intermediate rose for a fifth day, set to match the winning streak last seen in March, on signs of tighter market. Gold steadied after rising to the highest since early August on easing Fed rate hike bets.

Key events this week:

  • China manufacturing PMI, non-manufacturing PMI, Thursday

  • Japan industrial production, retail sales, Thursday

  • Eurozone CPI, unemployment, Thursday

  • ECB publishes account of July monetary policy meeting, Thursday

  • US personal spending and income, initial jobless claims, Thursday

  • China Caixin manufacturing PMI, Friday

  • Eurozone S&P Global Eurozone Manufacturing PMI, Friday

  • South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday

  • Boston Fed President Susan Collins speaks at virtual event, Friday

  • US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 8:34 a.m. New York time

  • Nasdaq 100 futures rose 0.2%

  • Futures on the Dow Jones Industrial Average rose 0.1%

  • The Stoxx Europe 600 was little changed

  • The MSCI World index rose 0.2%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro rose 0.3% to $1.0912

  • The British pound rose 0.5% to $1.2701

  • The Japanese yen was little changed at 145.97 per dollar

Cryptocurrencies

  • Bitcoin fell 0.6% to $27,407.86

  • Ether fell 0.4% to $1,719.89

Bonds

  • The yield on 10-year Treasuries was little changed at 4.12%

  • Germany’s 10-year yield advanced four basis points to 2.55%

  • Britain’s 10-year yield was little changed at 4.42%

Commodities

  • West Texas Intermediate crude rose 0.5% to $81.54 a barrel

  • Gold futures rose 0.2% to $1,968.20 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Sagarika Jaisinghani, Tassia Sipahutar and Lars Mucklejohn.

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2023-08-30 12:35:19

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