US stocks rose on Monday, bouncing back from last week’s losses, as Beijing’s latest move to ease Covid restrictions injected some optimism into markets rattled by inflation and rate-hike concerns. Treasuries fell across the board.
The S&P 500 and tech-heavy Nasdaq 100 advanced amid gains in megacaps including Apple Inc. and Microsoft Corp. Amazon.com Inc. advanced after implementing a 20-for-1 stock split. Twitter Inc. fell after Elon Musk said he believes the company is breaching their merger agreement by not providing information about spam and fake accounts he demanded.
Chinese regulators are set to ease curbs on ride-hailing giant Didi Global Inc. and other US-listed tech firms, sending Didi’s shares up more than 50%. Bitcoin rose back above the $31,000 mark.
Data last week showing stronger-than-forecast US hiring for May suggested the Federal Reserve won’t waver from its tightening path to rein in price pressures. But Goldman Sachs Group Inc. economists said the Fed may be able to pull off its aggressive rate-hike plan without tipping the country into recession. The easing of Chinese lockdowns will help abate supply-chain pressures, said Diana Mousina, a senior economist at AMP Capital.
“Positive news around Chinese economic activity and cheaper equity valuations could offer value from a long-term investment perspective, but volatility will remain high in the short-term,” Mousina said in a note.
More market commentary
- “Markets are naturally taking it all in and are navigating monetary policy and economic transition,” wrote John Stoltzfus, chief investment strategist at Oppenheimer. “Times like these we have found over the years require patience, prudent diversification and a sense of context. In spite of their troublesome nature in hindsight such downdrafts create opportunity for traders and investors.”
- “A strong consumer that keeps inflation too high for the Fed for too long is a significant risk,” wrote Dennis DeBusschere, the founder of 22V Research. “This week’s CPI report will help determine if price gains are slowing enough to give the Fed comfort or if more aggressive rate hikes/rhetoric will be needed to slow growth. Investors are much more focused on CPI than payroll or other data points.”
- “The upbeat mood was lifted further by signs of Beijing and Shanghai returning to everyday life,” Fiona Cincotta, senior financial markets analyst at City Index, said in a note. “Still, inflation concerns are not going anywhere fast. Rising crude oil prices and a strong labor report have lifted bets that the Fed may need to act aggressively to rein in inflation. US CPI data and consumer confidence data, both due on Friday, will be the key focus of the market this week.”
The US jobs report Friday quelled some concern that the world’s biggest economy is slowing too sharply, but also strengthened the view that the Fed will keep hiking rates to combat inflation. Investors bought equities last week, with US stocks seeing a fourth straight week of inflows as a bear market rally continues, according to Bank of America strategists, citing EPFR Global data.
Basic resources led an advance in the Stoxx Europe 600 index on Monday as copper rose to its highest since April, with sentiment across industrial metals bolstered by China’s gradual reopening. The technology sector outperformed.
The UK’s equity benchmark climbed more than 1% as traders returned after a four-day break. The pound gained and gilts fell amid speculation Prime Minister Boris Johnson will survive a leadership vote later Monday.
Crude oil held around $119 a barrel in New York after Saudi Arabia signaled confidence in demand with a larger-than-expected price increase in Asia. Meanwhile, the US was said to be considering allowing more sanctioned Iranian oil onto global markets to counter the decline in Russian supplies.
Meanwhile, the European Central Bank is set to announce an end to bond purchases this week and formally begin the countdown to an increase in borrowing costs in July, joining global peers tightening monetary policy in the face of hot inflation. The ECB is planniing to strengthen its support of vulnerable euro-area debt markets if they are hit by a selloff, Financial Times reported.
Key events to watch this week:
- Reserve Bank of Australia policy decision Tuesday
- World Bank’s “Global Economic Prospects” report Tuesday
- Reserve Bank of India rate decision Wednesday
- OECD Economic Outlook, a twice-yearly analysis of major global economic trends and prospects for the next two years. Wednesday
- European Central Bank rate decision, Christine Lagarde briefing, Thursday
- China trade, new yuan loans, money supply, aggregate financing. Thursday
- US CPI, University of Michigan consumer sentiment Friday
- China CPI, PPI Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.9% as of 11:13 a.m. New York time
- The Nasdaq 100 rose 1.2%
- The Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 rose 1.1%
- The MSCI World index rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.1% to $1.0703
- The British pound rose 0.4% to $1.2540
- The Japanese yen fell 0.5% to 131.55 per dollar
Bonds
- The yield on 10-year Treasuries advanced 10 basis points to 3.04%
- Germany’s 10-year yield advanced six basis points to 1.33%
- Britain’s 10-year yield advanced nine basis points to 2.25%
Commodities
- West Texas Intermediate crude fell 0.8% to $117.94 a barrel
- Gold futures were little changed
