Stocks Set to Rise as Traders Await Signs of Rate Cut: Markets Close

(Bloomberg) — European futures rose 0.2 percent, erasing declines in Asia, as investors reloaded on key U.S. payrolls data and other hints of interest rate cuts from the Federal Reserve meeting minutes.

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Asian shares snapped a three-day winning streak, dragged down by Chinese shares in Hong Kong. Tech stocks fell on concerns about the country’s consumer outlook, a planned sale by Walmart Inc. of its stake in JD.com Inc. and weak earnings from key players including Kuaishou Technology. Contracts for US and European stocks rose.

The dollar steadied after weakening for three sessions as markets also await Friday’s speech by Fed Chairman Jerome Powell in Jackson Hole for more clues on the amount and timing of interest rate cuts. The Bloomberg Dollar Spot index rose after three days of declines, while the Thai baht climbed to its highest level since July 2023 ahead of the country’s central bank decision.

“The moves we’re seeing in Asia’s morning session today point to cautious investor anticipation for Jerome Powell’s Jackson Hole message, as well as revisions to the US wage benchmark and August survey data that could call into question core strength of the US labor market. ” said Homin Lee, senior macro strategist at Banque Lombard Odier & Cie SA in Singapore. “We don’t think these two developments will be game-changers for the market in the region in the long run.”

Shares also fell in Tokyo, shrugging off improving export data. Japanese shares fell as the yen’s advance stoked earnings concerns. The local currency held steady around 145 to the dollar after rebounding on Tuesday.

Elsewhere in Asia, policymakers in Indonesia and Thailand are tipped to keep interest rates unchanged on Wednesday as they weigh uncertainties about policy transitions ahead of imminent Fed easing. Australian 10-year yields were down six basis points in morning trading.

In addition to flows and positioning, the recent rally has also been fueled by bets that the Federal Reserve will signal that it is moving closer to cutting interest rates, prompting bond traders to take on record amounts of risk as they anticipate a rise in the Treasury market.

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

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A gauge of European futures rose 0.2 percent, while U.S. futures rose 0.1 percent.

Janney Montgomery Scott’s Dan Wantrobski says he continues to anticipate ongoing stock market strength in the near term, but remains on “high alert” for another, potentially larger, correction wave moving into the August timeframe -October.

“From a time perspective, we’re heading into a window where there could be a high probability of a liquidity event happening — and the charts, trader positioning and sentiment are all very vulnerable in our view,” Wantrobski said. “We smell a ‘bull trap’ ahead. But we hope we’re wrong.”

Key events this week:

• US Fed Minutes Preliminary Review of BLS Annual Payrolls, Wednesday

• Eurozone HCOB PMI, consumer confidence, Thursday

• The ECB publishes the July rate decision report on Thursday

• US Initial Jobless Claims, Existing Home Sales, S&P Global PMI, Thursday

• Japan’s CPI on Friday

• Bank of Japan Governor Kazuo Ueda will attend a special session of the Japanese parliament on Friday to discuss a July 31 interest rate hike

• US new home sales on Friday

• Fed Chairman Jerome Powell speaks at the Jackson Hole Symposium in Wyoming on Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were up 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%

• 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

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.1% to $1.1118

• The Japanese yen fell 0.2 percent to 145.56 per dollar

• The offshore yuan was down 0.1 percent at 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 10-year Treasury yield was little changed at 3.80%

• Japan’s 10-year yield fell 1.5 basis points to 0.875%

• Australia’s 10-year yield fell 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 help of Bloomberg Automation.

–With assistance from Rob Verdonck and Jeanny Yu.

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