(Bloomberg) — European and Asian stock futures rose after the latest jobs data supported the case for interest rate cuts in the United States.
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The Euro Stoxx 50 contract climbed 0.2%, while its U.S. counterparts posted modest gains after the S&P 500 index closed less than 1% from its all-time high on Thursday. Hong Kong stocks led gains in Asian shares, while other regional benchmarks Japan, South Korea and Australia also advanced.
“There is still a lot of upside potential for big Big Tech as well as the S&P 500,” Daniel Yoo, head of global asset allocation for Yuanta Securities Korea, said on Bloomberg Television. Profit growth and even a slight drop in U.S. interest rates this year could push stocks to new record highs, he said.
The Hang Seng advanced following news that regulators were considering a proposal to exempt individual investors from paying taxes on dividends earned on Hong Kong stocks purchased through Stock Connect. Chinese onshore stocks fluctuated as investors weighed a report that U.S. President Joe Biden’s administration is set to unveil a sweeping decision on Chinese tariffs as soon as next week.
For Leuthold’s Doug Ramsey, an additional 10% gain in the S&P 500 is not out of the question, at least statistically. He analyzed 80 years of data on bull market rallies, focusing on those that occurred when unemployment was this low and the business cycle was this mature. If the current rally reaches previous records in length and height, the S&P 500 would end the year at 5,705.
If the economy slows, unemployment rises, inflation falls and the Fed is expected to cut rates, there will be plenty of buyers for U.S. Treasury bills and bonds, according to Joe Kalish of Ned Davis Research.
Treasuries remained stable, with the US 10-year yield holding around 4.45%, after support from a successful sale of US 30-year bonds for $25 billion.
Initial claims for U.S. unemployment benefits rose last week to their highest level since August, beating estimates, as a cooling labor market supports the case for cutting interest rates . San Francisco Fed President Mary Daly said interest rates are currently holding back the economy, but it may take “more time” to bring inflation back to its target.
“Time will tell whether this is a one-off phenomenon or a real slowdown in the labor market,” said Chris Larkin at Morgan Stanley’s E*Trade. “Investors may have adjusted to the idea of the Fed waiting until September to cut interest rates, but that doesn’t mean they’re comfortable waiting indefinitely.”
Inclusion of India
Data to be released in Asia on Friday includes India’s industrial production and China’s first-quarter current account balance. New lending and money supply data for China could also be released as early as today.
Separately, JPMorgan Chase & Co. said it was on track to include India in its emerging market debt index starting in June, a move expected to boost global investor inflows. Meanwhile, Oversea-Chinese Banking Corp. has offered 1.4 billion Singapore dollars ($1 billion) to buy the remaining stake in Great Eastern Holdings Ltd. which it does not currently have, with the aim of consolidating its leading position in wealth management.
Oil extended gains for a third day as key technical levels provided a floor for losses while investors digested a mixed report on U.S. stocks. Gold rose after jumping more than 1% on Thursday.
Key events this week:
UK industrial production, GDP, Friday
The ECB publishes the minutes of its April policy meeting on Friday
Consumer sentiment from the American University of Michigan, Friday
Chicago Fed President Austan Goolsbee speaks Friday
Some of the main market movements:
Actions
S&P 500 futures rose 0.1% as of 6:49 a.m. London time
Nikkei 225 (OSE) futures rose 0.5%
The Japanese Topix rose 0.4%
Australia’s S&P/ASX 200 rose 0.5%
Hong Kong’s Hang Seng rose 2.1%
The Shanghai Composite has changed little
Euro Stoxx 50 futures rose 0.3%
Nasdaq 100 futures rose 0.1%
Currencies
Bloomberg Dollar Spot Index little changed
The euro was little changed at $1.0776
The Japanese yen fell 0.1% to 155.65 per dollar
The offshore yuan was little changed at 7.2277 per dollar.
The Australian dollar fell 0.2% to $0.6607.
Sterling little changed at $1.2518
Cryptocurrencies
Bitcoin rose 0.2% to $62,775.29
Ether rose 0.3% to $3,030.65
Obligations
The yield on 10-year Treasury bills changed little at 4.46%
The Japanese 10-year yield was little changed at 0.910%
Australia’s 10-year yield fell one basis point to 4.33%
Raw materials
West Texas Intermediate crude rose 0.8% to $79.89 a barrel
Spot gold rose 0.5% to $2,358.67 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from April Ma.
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