Monday , October 25 2021

US Futures Gain as Stocks Rise; Dollar Drops: Markets Wrapped



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(Bloomberg) — U.S. index futures rose with European equities on Tuesday as traders reassess risks from China’s pressure on the real estate sector and look forward to this week’s Federal Reserve meeting.

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S&P 500 and Nasdaq 100 futures rose, pointing to some improvement in sentiment Monday after concerns over China Evergrande Group’s debt woes rattled markets. Bottom buyers in the last trading hour on Monday helped the S&P 500 ease some of its losses, but the index still posted the biggest drop since May.

The Stoxx Europe 600 index rose more than 1%, rebounding from the biggest drop in two months as energy companies led the rise and all industry sectors were green. Royal Dutch Shell Plc rose after the company offered shareholders a payment from the sale of its shale oil fields. Universal Music Group BV shares soared on their first stock market breakout after splitting from Vivendi SE.

Alongside concerns about Evergrande’s ability to meet its $300 billion obligations, investors are also positioning themselves for the two-day Fed meeting that begins Tuesday, when policymakers are expected to begin laying the groundwork for quantitative easing. Treasury yields rose and the dollar held steady.

“Most of this information is already known, we don’t think it will be necessary to start a wave of problems,” John Bilton, head of global multi-asset strategy at JPMorgan Asset Management, told Bloomberg TV. “I’m more concerned about chain sentiment at a time when investor sentiment is somewhat fragile. But looking at the fundamentals – overall growth and direction in the broader economy – we are still reasonably confident that the situation will improve on its own.”

The indicator of a Hong Kong real estate firm calmed after developers objected to a print report from the Chinese government. Evergrande slipped even deeper into the equity and credit markets. Concerns about a wider contagion remain after S&P Global Ratings said the developer was on the verge of default. Chinese markets reopen on Wednesday after the holiday.

The upheaval in China’s real estate sector – part of President Xi Jinping’s broader lockdown on private sectors as part of a “common welfare” initiative to reduce inequality – is increasing the risks faced by investors. These include strained stock valuations and slower economic reopening due to delta virus pressure, among price pressures triggered by commodities. Markets are also digesting the waning view of central bank policy support.

Elsewhere, Bitcoin lost its third day of volatile trading and fell 7.6% before climbing above $43,000. Oil rebounded after two days of declines, while iron ore futures breathed after Monday’s decline, but remained below $100 per tonne due to China’s steel production cuts.

In Canada, Prime Minister Justin Trudeau won a third term in an early election, but failed to regain his parliamentary majority. The country’s currency was among the top performers in the Group of 10 basket.

Here are the highlights to watch this week:

  • Bank of Japan rate decision, Wednesday

  • Federal Reserve rate decision, Wednesday

  • Bank of England interest rate decision, Thursday

  • Fed Chairman Jerome Powell, Fed Chairman Michelle Bowman and Vice Chairman Richard Clarida discuss the recovery of the pandemic on Friday

For more market analysis, read our MLIV blog.

Some of the main movements in the markets are:

Stocks

  • S&P 500 futures rose 0.7% as of 8:31 a.m. New York time.

  • Nasdaq 100 futures rose 0.7 percent

  • Futures Up 0.7% in Dow Jones Industrial Average

  • Stoxx Europe 600 up 1%

  • MSCI World Index rose 0.1 percent

currencies

  • Bloomberg Dollar Spot Index fell 0.1 percent

  • Euro rose 0.1% to $1,1740

  • The British pound was up 0.2% to $1.3678.

  • The Japanese yen was little changed at 109.46 against the dollar

Bonds

  • Yields on 10-year Treasuries rose one basis point to 1.32%

  • Germany’s 10-year interest rate fell one basis point to -0.33%

  • The UK’s 10-year interest rate has changed little at 0.79 percent.

commodities

  • West Texas Intermediate crude rose 0.9% to $70.90 a barrel.

  • Gold futures rose 0.4 percent to $1,771.10 an ounce.

More stories like this available on bloomberg.com

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