European Futures Gain; Yen Rebounds on Elections: Markets Wrap

(Bloomberg) — European stock futures gained in line with Asian shares as risk appetite across financial markets got a further boost from China’s latest stimulus measures and upbeat US momentum. The yen swung to gains following Japanese election results.

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Euro Stoxx 50 contracts rose 0.2% alongside Chinese shares after officials pledged to increase fiscal support and stabilize the property sector to revive growth. Futures for US indexes softened Friday after the S&P 500 climbed to its 42nd closing record of this year. The dollar rose, while 10-year US Treasury yields were flat.

Stimulus in the world’s two largest economies has been a catalyst for markets this week, with China lowering the amount of cash banks must keep in reserve on Friday, ahead of a weeklong holiday. The Federal Reserve’s preferred inflation indicator and a snapshot of consumer demand data, both of which are due later Friday, may provide additional cues on the path for US interest rates.

Today’s Asian market is “totally driven by China stimulus and support to overall global growth as a consequence,” said Matthew Haupt, a portfolio manager at Wilson Asset Management International. “We are still waiting for more stimulus to give this rally more duration.”

Elsewhere, the yen rebounded against the dollar as Shigeru Ishiba won the vote for leadership of Japan’s ruling party. Ishiba is supportive of the Bank of Japan’s steady policy normalization with higher interest rates.

The People’s Bank of China unleashed one of the country’s most daring policy campaigns in decades on Tuesday, with Beijing rolling out a strong stimulus package in a push to shore up the slowing economy and investor confidence. The moves sent Chinese shares soaring with the frenzy resulting in delays at Shanghai’s stock exchange.

Holding the politburo “meeting in September rather than waiting until the normally scheduled December meeting is in itself a signal that the authorities are willing to take more urgent action to achieve the 5% growth target,” senior analysts including Robert Carnell at ING Groep NV said in a note. “We saw a more aggressive-than-expected policy package from the PBOC this week and it is reasonable to expect other policies will soon follow.”

Further bullishness came from US economic data overnight while Hong Kong’s tech index hit its highest in over a year. Over in China, bonds slumped as investors favored risk assets instead of havens.

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Revised data showed the US economy in better shape than initially expected, spurred mainly by bigger consumer-driven growth fueled by robust incomes. A decline in US jobless claims underscored the resilience of the labor market. But investors tuning into commentary from Fed Chair Jerome Powell on Thursday didn’t get any details on the economic outlook or path for monetary policy.

In commodities, oil extended a sharp two-day drop, putting prices on course for a substantial weekly decline, on prospects of more supply from OPEC members Saudi Arabia and Libya. Copper rallied back above $10,000 a ton and iron ore broke through $100.

Gold headed for a third weekly gain after setting successive record highs on optimism the Federal Reserve will maintain an aggressive pace of interest-rate cuts this year.

Key events this week:

• Eurozone consumer confidence, Friday

• US PCE, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 7:30 a.m. London time

• Nasdaq 100 futures fell 0.4%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 1.1%

• The MSCI Emerging Markets Index rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1174

• The Japanese yen rose 0.8% to 143.60 per dollar

• The offshore yuan fell 0.3% to 6.9960 per dollar

• The British pound fell 0.2% to $1.3390

Cryptocurrencies

• Bitcoin rose 1.2% to $65,457.79

• Ether rose 1.1% to $2,661.48

Bonds

• The yield on 10-year Treasuries was little changed at 3.80%

• Germany’s 10-year yield was little changed at 2.18%

• Britain’s 10-year yield advanced two basis points to 4.01%

Commodities

• Brent crude rose 0.1% to $71.70 a barrel

• Spot gold fell 0.2% to $2,668.18 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu.

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