European equities, rebound in US futures; Falling yields: market envelope

(Bloomberg) – US index futures and European stocks showed signs of recovery after Tuesday’s sell-off as Treasury yields eased.

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S&P 500 futures rose 0.8% and the Stoxx Europe 600 gauge rebounded from a two-month low. The ten-year Treasury rate lost three basis points. These moves signaled a turnaround from Asian hours, when stocks extended their losses amid concerns about stagflation and the China Evergrande group’s debt crisis. Oil slipped after an increase in US crude inventories.

Moderating yields provide a breathing space for investors concerned about valuations, as higher rates reduce the present value of equity cash flows. However, the risks that sparked this week’s slump remain. The Federal Reserve has become more hawkish, a political stalemate over the US debt ceiling is crumbling, and an energy crisis is raising fears of high inflation and low growth.

“A lot is on the move: the pandemic is not over, the supply chain bottlenecks we are seeing are affecting all kinds of prices and we will have to see how that plays out as the results are not clear. in terms of inflation, ”Belita said. Ong, chairman of Dalton Investments, told Bloomberg Television.

Tech stocks, which were at the center of Tuesday’s crisis, rebounded. The subgroup’s main European index rose for the first time in four days, while December contracts on the Nasdaq 100 index rose 1.1%.

A rally in global stocks came to a halt this week as investors were reeling from soaring energy costs just as central banks began to make plans to withdraw some of the pandemic stimulus. US consumer confidence fell in September for a third straight month, suggesting that concerns about the delta variant and rising prices continued to weigh on sentiment.

MSCI Inc.’s Asian equity gauge posted the largest drop in six weeks. Japan fell as two candidates took part in the run-off ballot for the ruling party leader. The Chinese benchmark fell to an all-time low this month.

Investors are also watching for a deadline to raise the US debt ceiling. During a Senate hearing, Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen both warned that a US default would have catastrophic consequences. Republicans blocked a Democratic move in the Senate to increase the limit.

Brent and West Texas Intermediate crude futures fell at least 1% each. U.S. crude inventories rose more than 4 million barrels last week, according to the industry-funded American Petroleum Institute.

Elsewhere, the pound has traded around its lowest level since January as expectations for higher rates were offset by soaring energy prices and panic buying that is keeping investors cautious. Bitcoin was trading around $ 42,000.

In the latest news from Evergrande:

  • Developer sells stake in regional bank for around 10 billion yuan ($ 1.5 billion) as it offloads assets to deal with debt crisis

  • He faces another bond interest payment after giving no sign that he paid another last week

  • Evergrande owner Chinese Estates suspends Hong Kong operations

  • Fitch Ratings downgraded CC’s credit rating to C, a notch above the equivalent default level, to reflect “Evergrande is likely to have defaulted on interest payments on senior unsecured notes.”

Here are some events to watch this week:

  • Central bank chiefs Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) participate in an ECB forum panel on Wednesday

  • House Financial Services Committee hearing on the Fed and the Treasury’s response to the pandemic, Thursday

  • China Caixin Manufacturing PMI, Non-Manufacturing PMI, Thursday

  • Univ. of Michigan sentiment, Manufacturing ISM, US construction spending, spending / personal income, Friday

For more market analysis, read our MLIV blog.

Some of the main movements in the markets:

Actions

  • The Stoxx Europe 600 rose 1% at 8:29 a.m. London time

  • S&P 500 futures rose 0.8%

  • Futures on the Nasdaq 100 rose 1%

  • Futures contracts on the Dow Jones Industrial Average rose 0.6%

  • MSCI Asia-Pacific index fell 1.2%

  • MSCI Emerging Markets index fell 0.8%

Currencies

  • The Bloomberg Dollar Spot Index changed little

  • The euro fell 0.1% to $ 1.1667

  • The Japanese yen rose 0.2% to 111.32 per dollar

  • The offshore yuan was little changed at 6.4684 per dollar

  • The British pound was unchanged at $ 1.3537

Obligations

  • The yield on 10-year treasury bills fell three basis points to 1.51%

  • The German 10-year yield was little changed at -0.21%

  • UK 10-year yield fell two basis points to 0.97%

Merchandise

  • Brent crude fell 1.9% to $ 77.62 a barrel

  • Spot gold rose 0.3% to $ 1,739.94 an ounce

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