Asia Stocks, US Futures Rise as China Curbs Eased: Markets Wrap

S&P 500 had best week in 18 months, but volatility lingers
Yuan jumps; China outbreak wanes, measures to boost growth

Stocks in Asia and US futures advanced Monday after China eased some virus curbs and Wall Street had its best week since November 2020.

Japanese and Hong Kong equities led gains, while S&P 500 and Nasdaq 100 contracts climbed in a sign the bounce may have further to run. The S&P 500 wiped out its May losses and snapped a string of seven weekly declines as institutional investors rebalanced portfolios into the end of the month.

China’s yuan outperformed after the nation reported fewer Covid-19 cases in Beijing and Shanghai. That spurred the government to ease some of the strict virus controls to stimulate sagging growth. Chinese stocks had more modest gains as reopening plans sparked gains in selective sectors like consumer and travel.

The dollar slipped for a third day versus major peers as havens lost their appeal amid the improved mood. Oil traded near $116 a barrel as the European Union failed to agree on a revised package of Russian sanctions. Cash Treasuries won’t trade in Asia because of the US Memorial Day holiday.

Traders are pondering whether the bottom of the selloff is near as investors have been buying the dip after one of the worst starts to the year for equities. However, a wall of worries remains from hawkish central banks underscoring fears of a recession, escalating food inflation from the war in Ukraine and China’s lockdowns stunting economic activity.

“We are in the middle of a bear market rally,” said Mahjabeen Zaman, Citigroup Australia head of investment specialists, said on Bloomberg Television. “I think the market is going to be trading range bound trying to figure out how soon is that recession coming or how quickly is inflation going down.” She added that Treasury yields are set to peak this year.

Traders will be looking to the US payroll numbers later this week to gauge the Federal Reserve’s tightening path as it strives to rein in inflation. Meanwhile, the Fed is set to start shrinking its $8.9 trillion balance sheet starting Wednesday.

Elsewhere, Asia’s coal benchmark rallied to the highest level on record as India moved to secure shipments, tightening supplies in the region.

Here are some key events to watch this week:

US markets closed for Memorial Day Monday
EU leaders start a two-day special meeting in Brussels Monday with the war in Ukraine, defense, inflation, energy and food security on the agenda
China PMI Tuesday
Euro zone CPI Tuesday
The Federal Reserve is set to start shrinking its $8.9 trillion balance sheet Wednesday
The Fed releases its Beige Book report on regional economic conditions Wednesday
New York Fed President John Williams, St. Louis Fed President James Bullard speak at separate events Wednesday
OPEC+ virtual meeting Wednesday
Cleveland Fed President Loretta Mester discusses the economic outlook Thursday
US May employment report Friday
The UN’s Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday