Stocks set to rise as traders await hints of rate cut: Markets Wrap

(Bloomberg) — European futures rose 0.2%, ignoring declines in Asia, as investors refocused on key U.S. jobs figures and further hints of rate cuts from Federal Reserve meeting minutes.

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Shares in Asia snapped a three-day winning streak, dragged down by Chinese shares in Hong Kong. Technology shares fell on worries about the country’s consumer outlook, Walmart Inc.’s planned sale of its stake in JD.com Inc. and poor earnings from major players including Kuaishou Technology. Contracts for U.S. and European stocks rose.

The dollar stabilized after a three-session slide, while markets also await Fed Chairman Jerome Powell’s speech in Jackson Hole on Friday for more clues on the size and timing of rate cuts. The Bloomberg Dollar Spot Index edged higher after three days of declines, as the Thai baht climbed to its highest level since July 2023 ahead of the country’s central bank decision.

“The moves we’re seeing in Asia today in the morning session are indicative of investors’ cautious wait for Jerome Powell’s Jackson Hole message, as well as the revision to the U.S. payroll benchmark and August survey data that could cast doubt on the underlying strength of the U.S. labor market,” said Homin Lee, senior macro strategist at Banque Lombard Odier & Cie SA in Singapore. “We don’t think these two developments will ultimately be game changers for the market in the region.”

Shares also fell in Tokyo, ignoring improving export data. Japanese shares fell as the yen’s rise raised concerns about earnings. The local currency settled around 145 against the dollar after rallying on Tuesday.

Elsewhere in Asia, policymakers in Indonesia and Thailand are expected to leave interest rates unchanged on Wednesday as they weigh uncertainties over political transitions and await the Fed’s upcoming easing. Australia’s 10-year yield fell six basis points in morning trading.

In addition to the money flows and positioning, the recent rally was also fueled by bets that the Federal Reserve would signal it was getting closer to cutting rates. That led bond traders to take record amounts of risk on expectations that the U.S. Treasury market would rise.

The S&P 500 fell below 5,600 on Tuesday as Nvidia Corp. — which has surged nearly 25% in six days — led the losses in mega-caps. The 10-year Treasury yield was little changed after falling six basis points. Brent crude fell for a third day on the back of a potential Gaza ceasefire and growing concerns about the global demand outlook, while gold hit a new record high.

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A gauge for European blue-chip futures rose 0.2%, while U.S. futures rose 0.1%.

Dan Wantrobski of Janney Montgomery Scott says he still expects the stock market to remain strong in the near term, but is still “on high alert” for another, potentially larger corrective wave to continue into the August-October period.

“From a timing perspective, we’re entering a window where there’s a high probability of a liquidity event happening — and the charts, trader positioning, sentiment are all very vulnerable right now,” Wantrobski said. “We smell a bull trap. But I hope we’re wrong.”

Important events this week:

• US Fed Minutes, Preliminary Revision of BLS Annual Payrolls, Wednesday

• Eurozone HCOB PMI, consumer confidence, Thursday

• ECB to publish report on July rate decision on Thursday

• US initial jobless claims, existing home sales, S&P Global PMI, Thursday

• Japan CPI, Friday

• Bank of Japan Governor Kazuo Ueda will attend a special session of the Japanese parliament on Friday to discuss the July 31 rate hike

• US New Home Sales, Friday

• Fed Chairman Jerome Powell speaks at the Jackson Hole Symposium in Wyoming on Friday

Some of the major moves in the markets:

Shares

• S&P 500 futures rose 0.1% at 6:46 a.m. London time

• Japan’s Topix fell 0.4%

• Australia’s S&P/ASX 200 was little changed

• Hong Kong’s Hang Seng fell 1%

• The Shanghai Composite fell 0.3%

• Euro Stoxx 50 futures rose 0.2%

• Nasdaq 100 futures rose 0.1%

• Australia’s S&P/ASX 200 was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.1% to $1.1118

• The Japanese yen fell 0.2% to 145.56 per dollar

• The offshore yuan fell 0.1% to 7.1272 per dollar

• The Australian dollar remained virtually unchanged at $0.6744

• The British pound remained virtually unchanged at $1.3023

Cryptocurrency

• Bitcoin remained virtually unchanged at $59,332.34

• Ether was little changed at $2,591.94

Bonds

• The yield on 10-year government bonds remained virtually unchanged at 3.80%

• Japan’s 10-year yield fell 1.5 basis points to 0.875%

• The Australian 10-year yield fell eight basis points to 3.87%

Raw materials

• West Texas Intermediate crude oil fell 0.2% to $73.04 a barrel

• Spot gold rose 0.2% to $2,518.27 an ounce

This story was produced with the help of Bloomberg Automation.

–With the help of Rob Verdonck and Jeanny Yu.

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