Stocks Set to Rise as Traders Await Rate Cut Clues: Markets Wrap

(Bloomberg) -- European futures rose 0.2%, brushing off declines in Asia as investors reload for key US payrolls data and further clues on interest rate cuts from Federal Reserve meeting minutes.

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Stocks in Asia snapped a three-day winning streak, dragged by Chinese stocks in Hong Kong. Technology stocks dipped on concerns over the country’s consumption outlook, Walmart Inc.’s planned sale of its stake in JD.com Inc. and poor earnings from key players including Kuaishou Technology. Contracts for US and European shares ticked higher.

The dollar steadied after weakening for three sessions as markets also await Fed Chair Jerome Powell’s Jackson Hole speech on Friday for more clues on the amount and timing of the interest-rate reductions. The Bloomberg Dollar Spot Index ticked higher after three days of decline, as the Thai baht climbed to its highest since July 2023 ahead of the country’s central bank decision.

“The moves we see in Asia’s morning session today are indicative of investors’ cautious wait for Jerome Powell’s Jackson Hole message, as well as the US payroll benchmark revision and August survey data that could call into question the underlying strength of the US labor market,” said Homin Lee, senior macro strategist at Banque Lombard Odier & Cie SA in Singapore. “We do not think these two developments will be game changers for the region’s market in the end.”

Shares also slipped in Tokyo, shrugging off improving exports data. Japan’s equities dropped as the yen’s advance raises worries about earnings. The local currency steadied at around 145 against the dollar after rallying Tuesday.

Elsewhere in Asia, policymakers in Indonesia and Thailand are tipped to keep interest rates unchanged on Wednesday as they weigh uncertainties over political transitions while awaiting the Fed’s imminent easing. Australian 10-year yields fell six basis points in morning trading.

Aside from flows and positioning, the recent rally was also fueled by bets the Federal Reserve will signal it’s getting closer to cutting rates, leading bond traders to take on record amounts of risk as they anticipate a Treasury market rally.

The S&P 500 fell below 5,600 Tuesday as Nvidia Corp. — which had rallied almost 25% in six days — led losses in megacaps. Treasury 10-year yields were little changed after declining six basis points. Brent crude declined a third day on the back of a potential cease-fire in Gaza and mounting concern about the global demand outlook, while gold hit a fresh record high.

A gauge of European blue-chip futures rose 0.2% while US futures spiked 0.1%.

Dan Wantrobski at Janney Montgomery Scott says he continues to anticipate ongoing stock-market strength on a near-term basis, but remains on “high alert” for another, potentially bigger corrective wave moving through the August-October time frame.

“From a timing perspective, we are headed into a window where there may be high probability for a liquidity event to occur — and the charts, trader positioning, and sentiment are all very vulnerable right now in our view,” Wantrobski said. “We smell a ‘bull trap’ ahead. But hope we’re wrong.”

Key events this week:

US Fed minutes, BLS preliminary annual payrolls revision, Wednesday
Eurozone HCOB PMI, consumer confidence, Thursday
ECB publishes account of July rate decision, Thursday
US initial jobless claims, existing home sales, S&P Global PMI, Thursday
Japan CPI, Friday
Bank of Japan Governor Kazuo Ueda to attend special session at Japan’s parliament to discuss July 31 rate hike, Friday
US new home sales, Friday
Fed Chair Jerome Powell speaks at Jackson Hole symposium in Wyoming, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 6:46 a.m. London time
Japan’s Topix fell 0.4%
Australia’s S&P/ASX 200 was little changed
Hong Kong’s Hang Seng fell 1%
The Shanghai Composite fell 0.3%
Euro Stoxx 50 futures rose 0.2%
Nasdaq 100 futures rose 0.1%
Australia’s S&P/ASX 200 was little changed

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.1118
The Japanese yen fell 0.2% to 145.56 per dollar
The offshore yuan fell 0.1% to 7.1272 per dollar
The Australian dollar was little changed at $0.6744
The British pound was little changed at $1.3023

Cryptocurrencies

Bitcoin was little changed at $59,332.34
Ether was little changed at $2,591.94

Bonds

The yield on 10-year Treasuries was little changed at 3.80%
Japan’s 10-year yield declined 1.5 basis points to 0.875%
Australia’s 10-year yield declined eight basis points to 3.87%

Commodities

West Texas Intermediate crude fell 0.2% to $73.04 a barrel
Spot gold rose 0.2% to $2,518.27 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Rob Verdonck and Jeanny Yu.

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