Business Maverick

Business Maverick

US futures rise, China stocks swing, as CPI eases: markets wrap

US futures rise, China stocks swing, as CPI eases: markets wrap
The entrance of the Tokyo Stock Exchange, operated by Japan Exchange Group Inc, in Tokyo, Japan, on Thursday, Jan. 13, 2022. Japan’s largest exchange operator disclosed the components of three new market sections on Tuesday, but the long-awaited shake-up of the country’s sluggish stock market is attracting more skepticism than excitement.

US equity futures inched higher and Chinese stocks swung between small gains and losses on Thursday as signs of slowing inflation in the world’s two largest economies spurred hopes for monetary easing.

Contracts for the S&P 500 were about 0.2% higher after the benchmark rose 0.4% on Wednesday. Nasdaq 100 futures also rose following a 1.1% rally in the tech-heavy benchmark — which closed at the highest level since August — after headline US inflation softened. 

In China, inflation slowed more than expected in April while factory-gate price growth also fell short of forecasts, keeping the window open for monetary easing from the People’s Bank of China. 

Mainland China shares rose while Hong Kong’s Hang Seng Index fluctuated. The broader picture for Asian equities was mixed. South Korean stocks rose, Australian shares fell and Japanese equities declined, weighed down by a stronger yen.

The dollar held losses following a drop in Treasury yields Wednesday, which held into Asian trading. The policy-sensitive two-year Treasury yield closed the US session down 11 basis points after headline inflation eased to 4.9% in April. That was the first reading below 5% in two years and below consensus expectations. Core inflation remained at 5.5%. 

The yield on China’s 10-year government bonds fell about two basis points to 2.69%, set for the lowest level since November. This also came as China asked commercial banks to cap rates offered on some deposits to lower lenders’ funding costs. 

In Hong Kong, the cost to borrow overnight reached a sixteen year high as liquidity tightened after authorities repeatedly intervened to boost the local currency.

Elsewhere in the region, Adani Enterprises, billionaire Gautam Adani’s flagship, will hold a board meeting later this week to consider selling stock, the company said in a statement. 

The company’s shares have halved this year in a decline driven by accusations of fraud from short seller Hindenburg Research. The group’s US-currency bonds rose on Thursday amid a broad gain in investment-grade dollar notes in Asia.

Meanwhile, an illiquid corner of swaps insuring Credit Suisse Group AG debt has surged back to life. They’ve had their biggest jump this week since UBS Group AG agreed to buy Credit Suisse in March, as funds including FourSixThree Capital and Diameter Capital Partners pile in, according to people familiar with the matter.

In commodity markets, gold edged up as signs that US inflation is cooling fueled speculation that the Federal Reserve will soon pause tightening.

Oil advanced for the fourth session in five as easing US inflation weakened the dollar and traders assessed interruptions to supplies. 

The broader backdrop for markets continues to be affected by talks between President Joe Biden and congressional Republicans to avert a first-ever US default. There’s been little tangible progress, which is reflected in the cost of insuring America’s debt against default now eclipsing that of some emerging markets. The president and House Speaker Kevin McCarthy plan to hold another meeting on Friday. BM/DM

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