Wall Street Set for Boost on Rate-Cut Bets, China: Markets Wrap

(Bloomberg) — Global stocks rallied after China pledged fiscal stimulus and traders raised their bets on interest-rate cuts by major central banks.

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US futures climbed as US-listed China stocks advanced and Micron Technology Inc. surged in premarket trading on a strong revenue forecast. The Stoxx 600 index in Europe headed for a record close as luxury and mining stocks exposed to China gained. Treasury yields and the dollar edged lower.

Growing expectations that the Federal Reserve and European Central Bank will push on with their easing path are buoying markets. Traders are waiting for a pre-recorded address by Federal Reserve Chair Jerome Powell and jobs data later Thursday.

“The message, over the last 10 days or so, from monetary and fiscal policymakers across the globe, has been clear and undeniable — the policy ‘put’ is well and truly back,” said Michael Brown, a strategist at Pepperstone Group Ltd. “The path of least resistance is likely to continue to lead to the upside, over both the short- and medium-term.”

The promises to support fiscal spending and revive growth by China’s top leaders on Thursday added to a slew of measures from Beijing this week that have supercharged local assets and fueled broader risk appetite.

Money markets have flipped to favor a half-point cut by the Fed in November, with traders now pricing almost 39 basis points of reductions after lackluster US consumer data earlier in the week.

The US central bank’s preferred price metric and a snapshot of consumer demand will give more clues on the economy’s health on Friday.

“The Federal Reserve is more concerned about growth than they let on,” said Vanguard Chief Economist Joe Davis on Bloomberg TV. “Our view is they are going to be more aggressive in the near term.”

China Doubts

In China, the CSI 300 Index was headed for its biggest weekly gain in almost a decade after the stimulus pledge. But questions remain over the long-term impact of the measures.

“I wouldn’t be surprised if tomorrow we are going to see a bit of a pullback,” Helen Jewell, chief investment officer at BlackRock Fundamental Equities EMEA, told Bloomberg TV. “This is what is happening in the markets right now — you end up risk on one day, risk off the next day. The Chinese economy is still very fragile.”

Story continues

Swiss Cut

Elsewhere, the Swiss National Bank made a 25 basis-point interest rate cut in an effort to contain the strength of the Swiss franc, which has had the strongest rally in nearly a decade.

In commodities, oil fell for a second day as Saudi Arabia was reported to be weighing increasing output, and factions in Libya reached a deal that opens the way to the return of some crude production.

Israeli assets rallied after the US, European Union, and major powers in the Middle East including Saudi Arabia and Qatar proposed a three-week cease-fire between Israel and Hezbollah in Lebanon.

Key events this week:

• ECB President Christine Lagarde speaks, Thursday

• US jobless claims, durable goods, revised GDP, Thursday

• Fed Chair Jerome Powell gives pre-recorded remarks to the 10th annual US Treasury Market Conference, Thursday

• China industrial profits, Friday

• Eurozone consumer confidence, Friday

• US PCE, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.8% as of 6:08 a.m. New York time

• Nasdaq 100 futures rose 1.3%

• Futures on the Dow Jones Industrial Average rose 0.5%

• The Stoxx Europe 600 rose 1%

• The MSCI World Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro was little changed at $1.1141

• The British pound rose 0.2% to $1.3354

• The Japanese yen was little changed at 144.69 per dollar

Cryptocurrencies

• Bitcoin rose 0.5% to $63,824.27

• Ether rose 1.6% to $2,621.78

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.77%

• Germany’s 10-year yield declined three basis points to 2.15%

• Britain’s 10-year yield was little changed at 3.99%

Commodities

• West Texas Intermediate crude fell 1.6% to $68.55 a barrel

• Spot gold rose 0.4% to $2,668.62 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Divya Patil, Richard Henderson and Ben Priechenfried.

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