(Bloomberg) — European and U.S. stock futures rose on Friday, building on gains in Asian shares as traders piled into risk assets amid growing optimism that the U.S. economy will avoid a recession. The yen is set for its worst week since May.
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The Euro Stoxx 50 contract rose 0.3% and the S&P 500 added 0.2%, extending Wall Street’s overnight gains. Asia’s benchmark equity gauge is poised for its best weekly performance in a year, as Japanese stocks lifted exporters’ earnings on a weaker yen. The currency fell 1.3% against the dollar on Thursday and was trading at the 149 level, easing fears of a major carry trade.
U.S. data this week, on everything from inflation to retail sales to jobless claims, reassured investors that the world’s largest economy is heading toward a “Goldilocks” scenario where inflation won’t hold back growth. Global stocks largely erased last week’s losses as traders worried the Federal Reserve might not cut rates enough to stave off a recession.
“Asian equities are enjoying an impressive run today thanks to a renewed sense of ‘perfect balance’ thanks to recent well-anticipated economic releases,” said Hebei Chen, analyst at IG Markets Ltd. Still a strong recovery with no sign of slowing.”
Treasuries in Asia were steady after Thursday’s slide, as signs of a rebound in the US economy in the latest data releases prompted traders to back off bets on a jumbo September rate cut. They are now pricing in a 30-basis-point cut next month, with a total of 92 basis-point cuts expected for the rest of 2024.
Stocks continued to rebound from last week’s slump that rocked global markets as fears about the U.S. economy eased. The S&P 500 extended a six-day rally to 6.6% on Thursday, marking the best performance in such a span since November 2022. Walmart Inc., often seen as a growth barometer, rose to a solid outlook.
Meanwhile, Wall Street’s “fear gauge” — the VIX — fell about 15 after peaking at 65 last week. This recovery in U.S. stocks from last week’s heavy sell-off suggests that trend-following quant funds may return soon, providing further support to stocks.
In Japan, stocks headed for their biggest weekly advance since April 2020 on renewed weakness in the yen. This weakness may attract some hedge funds back into the carry trade that broke out two weeks ago.
“Exporters are taking advantage of the weaker yen and firmer U.S. economic data,” said Hiroshi Namioka, chief strategist at T&D Asset Management. .”
Elsewhere in Asia, China’s central bank chief pledged further measures to support the country’s economic recovery, while warning it would not take “draconian” measures.
Alibaba Group Holding Ltd rose as confidence in tech stocks outweighed concerns about its earnings. JD.com Inc. It posted its biggest gain since March after net profit beat estimates in results released late Thursday.
Soft landing
U.S. officials are using a scenario called “soft landing” to reduce inflation by using higher rates without shrinking the economy. Alberto Musallem, president of the Fed Bank of St. Louis, said the time was right to cut interest rates. His Atlanta counterpart Rafael Bostick told the Financial Times he was “open” to a cut in September.
“A soft landing is no longer a hope. It’s becoming a reality,” said David Russell at Trade Station. “These numbers suggest that recent market volatility is not really a growth scare. It’s a normal summer season amplified by moves in the currency market.”
Among commodities, gold was on track for a small weekly gain. Oil fell as the market weighed strong U.S. economic data and a possible strike against Iran or its proxies against a subdued Chinese demand outlook for Israel.
Highlights of this week:
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U.S. Housing Starts, University of Michigan Consumer Sentiment, Friday
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The central bank’s Austin Goolsbee speaks on Friday
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Housing Canada starts Friday
Some key movements in the markets:
Shares
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S&P 500 futures were up 0.2% as of 6:40 a.m. London time.
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Nikkei 225 futures (OSE) rose 3.5%
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Japan’s Topix rose 2.8%
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Australia’s S&P/ASX 200 rose 1.1%
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Hong Kong’s Hang Seng rose 1.9%
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The composition of Shanghai was slightly modified
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Euro Stoxx 50 futures rose 0.3%
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Nasdaq 100 futures rose 0.3%
Coins
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was up 0.1% at $1.0984
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The Japanese yen rose 0.2% to 149.01 per dollar
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The offshore yuan fell 0.2% to 7.1766 per dollar
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The Australian dollar rose 0.3% to $0.6631
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The British pound was up 0.2% at $1.2878
Cryptocurrencies
Bonds
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The yield on 10-year Treasuries fell a basis point to 3.90%
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Japan’s 10-year yield rose 4.5 basis points to 0.875%
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Australia’s 10-year yield rose six basis points to 3.94%
materials
This story was produced with the help of Bloomberg Automation.
–With help from Winnie Hsu.
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