European Stocks Will Follow US Tech Rally: Markets Wrap

(Bloomberg) — European stock futures are rising, following Asian shares after a rally in major U.S. technology stocks pushed Wall Street to a new record high.

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Futures on the Euro Stoxx 50 index rose as much as 0.7% after the S&P 500 hit a record high for the 30th time this year, countering concerns that the narrow breadth could make the market more vulnerable to surprises. The dollar strengthened against most of its Group of 10 peers.

The Australian dollar extended earlier gains after Reserve Bank Governor Michele Bullock said at a news conference that the central bank was discussing the case for a rate hike at its policy meeting. Policymakers kept their benchmark interest rate at a twelve-year high of 4.35% for the fifth time in a row.

“The RBA’s aggressive stance has been maintained, but that is no surprise to the markets,” said Charu Chanana, head of currency strategy at Saxo Markets. “The Aussie’s path is likely to remain focused on external factors, and looks bearish in the near term given the resurgent US dollar and slowing momentum in China and commodities.”

Asian chip stocks were among the biggest contributors to the MSCI Asia Pacific index’s gains. Shares of Tesla China supplier rose after news that the electric car maker had been allowed to test its advanced driver assistance system on some streets of Shanghai. In South Korea, shares of SK Hynix Inc. rose. to a 24-year high as an analyst said the chipmaker could see upward revisions to its forward earnings consensus.

Hong Kong will end its decades-long practice of closing markets during typhoons and major storms from September 23. The decision to allow trading during typhoons and major storms bodes well for liquidity and could increase the market’s competitiveness over time, analysts say.

Ahead of Wednesday’s holiday in the US, traders braced for retail sales data and a slew of Federal Reserve speakers. Government bonds traded higher in Asia after falling Monday amid a wave of selling of high-quality corporate bonds that topped $21 billion.

The US benchmark index reached a high of 5,470 on Monday, with Tesla Inc. and Apple Inc. saw the biggest gains in megacaps. The Nasdaq 100 edged closer to 20,000 as Micron Technology Inc. rose to a record after some companies raised their targets.

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“We believe the S&P 500 could reach 6,000 by the end of the year as the combination of better earnings and one or two rate cuts is a turbo booster for stock prices,” said James Demmert of Main Street Research. “The Fed may not have to cut rates this year, but if they do, it will be even more bullish for stocks, especially tech.”

Optimism about a resilient economy, improving corporate earnings and the possible onset of rate cuts have pushed U.S. stocks up about 15% this year. Fed Bank of Philadelphia President Patrick Harker said he believes one rate cut this year is appropriate based on his current forecast.

Investors will be closely watching the implications of Beijing’s latest move in trade tensions with Brussels, after China launched an anti-dumping investigation into pork imports from the European Union. It comes as the bloc looks at Chinese subsidies in a range of industries and will impose tariffs on electric car imports from July.

In commodities, oil posted the biggest gain in a week as risky sentiment in broader markets overshadowed a mixed outlook for crude. Copper rose from its lowest level since mid-April. Gold was little changed.

Main events this week:

• Eurozone CPI, Tuesday

• US retail sales, corporate inventories, industrial production, Tuesday

• The Fed’s Thomas Barkin, Lorie Logan, Adriana Kugler, Alberto Musalem and Austan Goolsbee to speak Tuesday

• British CPI, Wednesday

• American Juneteenth holiday, Wednesday

• Prime rates for Chinese loans, Thursday

• Consumer confidence in the eurozone, Thursday

• British BOE interest rate decision, Thursday

• US housing market opens, first unemployment claims, Thursday

• Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday

• Sales of existing homes in the US, Conf. Board leading index, Friday

• The Fed’s Thomas Barkin will speak on Friday

Some of the major moves in the markets:

Shares

• S&P 500 futures were unchanged at 2:41 p.m. Tokyo time

• Nasdaq 100 futures were little changed

• Japan’s Topix rose 0.4%

• Australia’s S&P/ASX 200 rose 0.9%

• Hong Kong’s Hang Seng fell 0.1%

• The Shanghai Composite rose 0.4%

• Euro Stoxx 50 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.1% to $1.0722

• The Japanese yen was little changed at 157.79 per dollar

• The offshore yuan was little changed at 7.2729 per dollar

Cryptocurrencies

• Bitcoin fell 0.8% to $65,820.66

• Ether fell 1.5% to $3,460.07

Bonds

• The yield on ten-year government bonds fell by one basis point to 4.27%

• The Japanese ten-year yield rose by 1.5 basis points to 0.940%

• The Australian ten-year yield rose by four basis points to 4.15%

Raw materials

• West Texas Intermediate crude fell 0.1% to $80.23 a barrel

• Spot gold rose 0.2% to $2,323.42 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Winnie Hsu, Tassia Sipahutar and Swati Pandey.

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