Stocks Rise for Third Day on US Soft Landing Hopes: Markets Wrap

(Bloomberg) — Global equities rose for the third day and the dollar slipped, as better-than-expected US consumer confidence data and China’s renewed pledge to prioritize economic growth lured more investors back into stocks and other riskier assets.

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Europe’s Stoxx 600 equity gauge opened 0.4% higher, while US futures contracts advanced after the underlying S&P 500 and the Nasdaq 100 index got a 1.5% boost from Wednesday data showing US consumer confidence at an eight-month high.

“The resilience of the US economy thus continues to impress, and the probability is turned up a mini step for a soft landing,” analysts at SEB in Stockholm told clients, noting recent selloffs had left global investors with plenty of “dry powder” to buy equities whenever opportunities arose.

They noted the S&P 500 had fallen almost 5% this month, contrasting with an average 1.5% December gain since 1950.

Read More: Hounded Stock Bulls Catch Rare Break in Worst December Since ‘18

The latest gains have unfolded as trading starts to wind down for the year, Federal Reserve speakers have fallen silent and a few positive data and earnings prints have emerged. Dust is also settling for now on the Bank of Japan’s sudden hawkish pivot on Tuesday, when it decided to double the upper limit of its trading bonds on 10-year debt.

Traders will likely continue testing the BOJ’s new 0.5% yield limit, and the central bank conducted an additional debt-purchase operation, pushing yields down to about 0.385%. However, 10-year borrowing costs are on course for their biggest weekly jump since 2015.

Globally, yields on Treasuries and euro zone bonds slipped but concerns remain that Japanese investors could now be persuaded to bring home some of the trillions of dollars they have stashed in foreign stocks and bonds. That could further lift global borrowing costs and drag on already cooling economic growth.

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On currency markets, the yen resumed its rise while the dollar slipped against a group of currency peers.

Incremental shifts in capital flows and interest rate was key for the pair, Jefferies analyst Brad Bechtel noted, adding “the Fed is close to done hiking, which means that real rates in the US are done rising and will moderate a bit, taking pressure off of the dollar.”

Asian stocks meanwhile snapped a five-day losing streak, with Hong Kong up more than 2%. While a surge of Covid infections in Shanghai and Beijing have stoked concerns for economic growth, a slew of comments from regulators indicated support is forthcoming for the broader Chinese economy and real estate developers.

Oil prices were poised to end an extraordinarily volatile year modestly higher. West Texas Intermediate crude futures held above $78 a barrel, extending their gain into a fourth day, benefiting from a decline in US inventories and the consumer confidence uptick.

Key events this week:

• US GDP, initial jobless claims, US Conf. Board leading index, Thursday

• US consumer income, new home sales, US durable goods, PCE deflator, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 3:40 a.m. New York time

• Nasdaq 100 futures rose 0.2%

• Futures on the Dow Jones Industrial Average rose 0.1%

• The Stoxx Europe 600 rose 0.4%

• The MSCI World index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro rose 0.3% to $1.0639

• The British pound rose 0.3% to $1.2114

• The Japanese yen rose 0.4% to 131.99 per dollar

Cryptocurrencies

• Bitcoin rose 0.3% to $16,838.25

• Ether rose 0.3% to $1,215.96

Bonds

• The yield on 10-year Treasuries declined four basis points to 3.63%

• Germany’s 10-year yield declined three basis points to 2.28%

• Britain’s 10-year yield declined three basis points to 3.54%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Ishika Mookerjee and Mark Cranfield.

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