(Bloomberg) — European stocks look set to track the advance in Asian peers on bets that the upcoming US consumer price report will allow the Federal Reserve to start easing in September.
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The Euro Stoxx 50 futures climbed 0.3%, while US equity contracts traded little changed. The MSCI (MSCI) benchmark for Asian stocks climbed for a fourth session to recover further from last week’s rout. The gains came after the US producer price index rose less than forecast, helping to fuel a 1.7% rally in the S&P 500 (^GSPC).
The easing of price pressures in the US has bolstered confidence that officials can start lowering borrowing costs and refocus on supporting the labor market. Forecasters expect a modest 0.2% increase in both the consumer price index and the core gauge excluding food and energy in data due Wednesday — which would mark the smallest three-month increase for the latter since early 2021.
“Global markets seem to be sounding the all-clear signal following the recession scare last week,” said Jun Rong Yeap, a strategist at IG Asia Pte. “Further inflation progress in US producer prices, which may be a precursor for more easing in the consumer prices as well, has offered additional legs to the risk rally.”
The pound fell against the dollar after UK inflation data came in below forecasts. The Consumer Prices Index rose 2.2% in July after a 2% gain in each of the two previous months, the Office for National Statistics said Wednesday. Economists had expected a reading of 2.3%, and the Bank of England was forecasting 2.4%.
New Zealand’s 10-year benchmark bond yields slumped as the central bank cut rates by 25 basis points, embarking on an easing cycle much sooner than previously indicated. The kiwi fell over 1% while local stocks rallied.
Treasuries were little changed after rising across the curve in the previous session, with positioning data showing traders remain bullish. A Bloomberg gauge of the dollar steadied around a four-month low.
The revival in risk sentiment and softness in the dollar supported Asian currencies. Indonesia’s rupiah gained as much as 1% while the Singapore dollar hovered near this year’s high.
In Japan, the Nikkei fluctuated as traders digested news that Prime Minister Fumio Kishida won’t run for a second term as leader of the long-ruling Liberal Democratic Party in September. The yen steadied after earlier strengthening toward the 146-per-dollar mark.
China Earnings
Elsewhere in Asia, Chinese stocks fell following data that showed bank loans to the real economy contracted for the first time in 19 years. A gauge of Chinese tech companies in Hong Kong slid more than 1% ahead of earnings from Tencent Holdings Ltd. and its buyback plans.
“The Chinese internet giants reporting this week will be very important to see if consumption weakness in China weighs on margins and ROIs, and which sub-segment vertical such as gaming may be brighter spots,” said Britney Lam, head of equities-long/short at Magellan Investments Holding Ltd. “Valuation is attractive but earnings momentum is key.”
Overnight, the S&P 500 saw its biggest four-day rally this year. The Nasdaq 100 climbed 2.5%.
Wall Street’s favorite volatility gauge — the VIX — tumbled to around 18. Swap traders priced in an about 40 basis-point Fed cut in September and a total rate reduction of over 105 basis points for 2024.
In the corporate world, UBS Group AG posted higher than expected profit in the second quarter, buttressing Chief Executive officer Sergio Ermotti’s efforts to return capital to shareholders and finalize the integration of Credit Suisse.
Oil climbed in Asia trading, rebounding from losses on Tuesday, as an industry report pointed to a sizable drop in US crude stockpiles and tensions simmered in the Middle East. Gold fell.
Key events this week:
Eurozone GDP, industrial production, Wednesday
US CPI, Wednesday
China home prices, retail sales, industrial production, Thursday
US initial jobless claims, retail sales, industrial production, Thursday
Fed’s Alberto Musalem and Patrick Harker speak, Thursday
US housing starts, University of Michigan consumer sentiment, Friday
Fed’s Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 7:19 a.m. London time
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.6%
The MSCI Emerging Markets Index rose 0.3%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0990
The Japanese yen fell 0.1% to 147.00 per dollar
The offshore yuan was little changed at 7.1499 per dollar
The British pound fell 0.2% to $1.2833
Cryptocurrencies
Bitcoin rose 0.3% to $60,752.46
Ether rose 1.2% to $2,732.59
Bonds
The yield on 10-year Treasuries was little changed at 3.85%
Germany’s 10-year yield declined four basis points to 2.19%
Britain’s 10-year yield declined three basis points to 3.89%
Commodities
Brent crude rose 0.6% to $81.14 a barrel
Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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