(Bloomberg) — European stocks tracked gains in Asia, climbing as investors awaited U.S. price data that could provide guidance on the Federal Reserve’s policy stance.
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The Stoxx Europe 600 index rose 0.3% at the open, led by gains in financial services and banks. U.S. stock index futures rose after being flat on Wall Street. Asian shares rose, helped by gains in Japanese shares, recouping losses from last week’s sell-off.
The British pound rose after data showed Britain’s unemployment rate unexpectedly fell in the second quarter, raising doubts about the pace of the Bank of England’s monetary easing, while U.S. Treasuries and the dollar were steady.
After last week’s turmoil, markets are keeping their eye on the U.S. Consumer Price Index on Wednesday to gauge whether the Fed will intervene more liberally or more constrainedly to ensure a soft landing for the economy. Attention is also on the Producer Price Index, due for release later on Tuesday, as a gauge of pipeline inflation risks, due to the recent rise in oil prices.
“The first wave of unwinding the yen carry trade should now be complete and investors’ attention is now turning to U.S. inflation and retail sales data to gauge the possibility of a soft landing. Risk sentiment is recovering,” said Linda Lam, head of North Asia equity advisory at Union Bancaire Privé.
Japanese stocks rose after the holiday as a weaker yen was seen as a support for exporters. MSCI’s Asia Pacific index rose 1%, erasing losses from last week’s decline when risk aversion saw indexes around the world plunge and the VIX U.S. volatility index briefly surpass 65, compared with a historical average of about 19.5.
“The market reaction to last week’s VIX spike reflects a reassessment of positions, rather than simply the U.S. data or an unwinding of the yen’s strength,” said Billy Leong, investment strategist at Global X Management in Sydney. “But it’s important to be cautious when reading into Asia in the near term, given signs of overseas capital outflows and weakening liquidity.”
Brent crude oil hovered near Monday’s $82 price level as the U.S. sees an Iranian attack on Israel as more likely. Israel’s sovereign debt was downgraded by one notch by Fitch Ratings, but the firm maintained its credit rating on a negative outlook as the ongoing military conflict weighs on the country’s finances. Treasury bonds held on to Monday’s gains.
The story continues
Elsewhere in Asia, regulators told commercial banks in China’s Jiangxi province not to settle bond purchases, taking the most extreme step yet to quell a market rally that has alarmed Beijing.
The crackdown has begun to hit the corporate bond market, with the average yield on AA-rated one-year corporate notes, typically considered junk in the onshore market, recording its biggest increase since December 2022.
Major events this week:
German ZEW survey forecast, Tuesday
U.S. Producer Price Index, Tuesday
Federal Reserve President Raphael Bostic to speak Tuesday
Eurozone GDP, industrial production on Wednesday
U.S. Consumer Price Index, Wednesday
China home prices, retail sales, industrial production on Thursday
U.S. initial jobless claims, retail sales, industrial production Thursday
Federal Reserve Bankers Alberto Mussallem and Patrick Harker to speak Thursday
U.S. housing starts, University of Michigan consumer confidence, Friday
Fed President Austin Goolsby to speak Friday
Some of the key market developments:
stock
The Stoxx Europe 600 index was up 0.3% as of 8:18 a.m. London time.
S&P 500 futures up 0.5%
Nasdaq 100 futures rose 0.8%
Dow Jones Industrial Average futures up 0.3%
MSCI Asia Pacific Index rose 1.1%
The MSCI Emerging Markets Index was little changed
currency
The Bloomberg Dollar Spot Index was little changed.
The euro was little changed at $1.0929
The Japanese yen fell 0.5% to 147.90 yen per dollar.
The offshore yuan was little changed at 7.1760 to the dollar.
The British pound rose 0.2% to $1.2800
Cryptocurrency
Bitcoin rose 1% to $59,433.28.
Ether fell 0.8% to $2,659.39.
Bonds
The yield on the 10-year Treasury note rose 1 basis point to 3.91%.
German 10-year government bond yields were little changed at 2.23%
UK 10-year government bond yields rose 1 basis point to 3.93%.
merchandise
Brent crude fell 0.5% to $81.91 a barrel.
Spot gold fell 0.4% to $2,462.42 an ounce.
This story was produced with assistance from Bloomberg Automation.
–With assistance from Jason Scott.
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