European Futures Gain; Yen bounces back on election: Markets Wrap

(Bloomberg) — European stock futures gained in line with Asian shares as risk appetite in financial markets got a fresh boost from China’s latest stimulus measures and upbeat momentum from the U.S. The yen posted gains following the Japanese election results.

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Euro Stoxx 50 contracts rose 0.2 percent, along with Chinese shares, after officials pledged to increase fiscal support and stabilize the housing sector to revive growth. US index futures eased on Friday after the S&P 500 climbed to its 42nd record close this year. The dollar rose, while US 10-year Treasury yields remained flat.

Stimulus from the world’s two largest economies has been a catalyst for markets this week, with China on Friday reducing the amount of cash banks must hold in reserve ahead of a week-long holiday. The Federal Reserve’s preferred inflation gauge and a snapshot of consumer demand data, both due later Friday, could provide further clues on the path for US interest rates.

The Asian market today is “entirely driven by China’s stimulus and support for global global growth as a consequence,” said Matthew Haupt, portfolio manager at Wilson Asset Management International. “We are still waiting for more incentives to give this rally more duration.”

Elsewhere, the yen rebounded against the dollar as Shigeru Ishiba won the vote to head Japan’s ruling party. Ishiba advocates continued policy normalization by the Bank of Japan, with higher interest rates.

The People’s Bank of China on Tuesday unleashed one of the country’s boldest policy campaigns in decades, with Beijing rolling out a powerful stimulus package to shore up the slowing economy and investor confidence. The moves sent Chinese shares higher, with the frenzy leading to delays on the Shanghai Stock Exchange.

Holding “the Politburo meeting in September instead of waiting until the normally scheduled meeting in December is itself a signal that the authorities are willing to take more urgent steps to achieve the 5% growth target,” senior analysts said , including Robert Carnell of ING Groep NV. in a note. “We saw a more aggressive than expected policy package from the PBOC this week and it is reasonable to expect more policies to follow soon.”

A fresh boost came from US economic data overnight, while Hong Kong’s technology index hit its highest level in over a year. In China, bonds tumbled as investors preferred risky assets to havens.

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The revised data showed the US economy in better shape than initially expected, boosted mainly by stronger consumer-led growth fueled by robust incomes. A drop in US jobless claims underscored the resilience of the labor market. But investors listening to Fed Chairman Jerome Powell’s comments on Thursday received no details on the economic outlook or the path of monetary policy.

In commodities, oil extended a two-day slump, putting prices on track for a substantial weekly decline on the prospect of more supply from OPEC members Saudi Arabia and Libya. Copper is back above $10,000 a tonne and iron ore has broken $100.

Gold headed for a third weekly gain after setting successive highs on optimism that the Federal Reserve will maintain an aggressive pace of interest rate cuts this year.

Key events this week:

• Eurozone consumer confidence, Friday

• US PCE, University of Michigan, Consumer Sentiment, Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were down 0.1% as of 7:30 a.m. London time

• Nasdaq 100 futures fell 0.4%

• Futures on the Dow Jones Industrial Average were little changed

• MSCI Asia Pacific index rose 1.1%

• MSCI Emerging Markets index rose 0.6%

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1174

• The Japanese yen rose 0.8 percent to 143.60 per dollar

• The offshore yuan was down 0.3 percent at 6.9960 per dollar

• Sterling fell 0.2% to $1.3390

Cryptocurrencies

• Bitcoin rose 1.2% to $65,457.79

• Ether rose 1.1% to $2,661.48

BONDS

• The 10-year Treasury yield was little changed at 3.80%

• Germany’s 10-year yield was little changed at 2.18%

• Britain’s 10-year yield rose two basis points to 4.01%

commodities

• Brent crude rose 0.1% to $71.70 a barrel

• Spot gold was down 0.2% at $2,668.18 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Winnie Hsu.

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