European and US equity futures climbed and Asian stocks rose in a region-wide rally led by Hong Kong technology companies as traders look to the Federal Reserve to pause interest rate hikes in June.
Contracts for the Euro Stoxx 50 rose around 0.5% while those for the S&P 500 and Nasdaq 100 edged around 0.2% higher in Asian trading. The gains in US futures followed a renewed surge in tech giants that pushed Wall Street higher Thursday ahead of jobs data due Friday that’s projected to show a slowdown. News that Congress had passed legislation to avert a US default added to the buoyant mood.
Shares in Japan, Australia, China advanced while South Korea’s Kospi index was headed for bull market territory following a gain of more than 20% from a low in September. Hong Kong’s Hang Seng index rose more than 3%, pulling the benchmark back from the brink of a bear market following concerns about Chinese growth.
Despite stronger-than-expected manufacturing figures Thursday, and the gains in Hong Kong equities Friday, investors remain cautious on the outlook for China.
“There was too much hype in the economic data and in Chinese equities starting at the end of November last year,” Daniel Lam, head of equity strategy for Standard Chartered Wealth Management, said in an interview with Bloomberg Television. “People have to be a bit patient. You have to wait for economic expectations to go lower.”
Elsewhere in Asia, India’s Sensex is near an all-time-high and Philippines equities pulled back from the cusp of a 10% correction.
Australian bond yields spiked as traders assessed the fallout of the decision from the country’s Fair Work Commission to increase the minimum wage by 5.75%. New Zealand bond yields were largely unchanged, following Thursday’s decline in Treasury yields.
The dollar declined, adding to the biggest drop in more than two months in the prior session. The won strengthened after South Korean economic growth numbers outpaced estimates slightly while inflation came in softer than expected.
The outlook for US interest rates was supporting the moves in Asia, as was a resolution to the debt-ceiling crisis, with the Senate passing legislation to suspend the cap and impose restraints on government spending through to the 2024 election.
Traders are betting that the monthly US jobs report later on Friday will bring enough moderation in the pace of hiring to allow the Fed to pause its tightening policy.
Fed Bank of Philadelphia President Patrick Harker said “we should at least skip this meeting in terms of an increase.” In an essay Thursday, his St. Louis counterpart James Bullard, said he believes interest rates are at the low end of what’s likely to be sufficiently restrictive to bring down inflation.
“We are really ripe for some type of pullback” Erin Gibbs, senior partner and chief investment officer for Main Street Asset Management said in an interview with Bloomberg Television. “There is a little cautiousness, a little uncertainty as we get a clearer idea of how the Fed will act.”
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 7:07 a.m. London time. The S&P 500 rose 1%
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 1.3%
- Japan’s Topix rose 1.6%
- Australia’s S&P/ASX 200 rose 0.5%
- Hong Kong’s Hang Seng rose 4%
- The Shanghai Composite rose 0.8%
- Euro Stoxx 50 futures rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.1% to $1.0776
- The Japanese yen was little changed at 138.84 per dollar
- The offshore yuan rose 0.3% to 7.0830 per dollar
- The Australian dollar rose 0.7% to $0.6614
- The British pound rose 0.1% to $1.2540
Cryptocurrencies
- Bitcoin rose 1% to $27,131
- Ether rose 1.2% to $1,891.78
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.62%
- Japan’s 10-year yield was little changed at 0.410%
- Australia’s 10-year yield advanced three basis points to 3.64%
Commodities
- West Texas Intermediate crude rose 1% to $70.81 a barrel
- Spot gold rose 0.1% to $1 980.21 an ounce
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