Stocks Rise as China Pledges More Economic Support: Markets Wrap
- China’s central bank vows help as Covid lockdowns sap growth
- Tech shares in Hong Kong jump; Treasuries drop, dollar slips
Stocks climbed Tuesday after China’s pledge to boost monetary-policy support for the nation’s Covid-hit economy assuaged some of the concerns about the outlook for the global recovery.
An Asia-Pacific equity index rose for the first time in four sessions amid a near-5% jump in technology shares in Hong Kong and a partial rebound in Chinese bourses from their plunge Monday. U.S. equity futures edged up and European contracts added about 1.5%
Aside from vowing more assistance, the People’s Bank of China also said it will promote healthy and stable development in financial markets. Most of Beijing is being tested for the virus, fanning fears of an unprecedented lockdown there.
Treasuries slipped along with the dollar and oil advanced in a sign of steadier investor sentiment. But the risk of an economic downturn from China’s lockdowns, as well as aggressive Federal Reserve policy tightening to quell inflation, continues to hang over markets.
The yuan pushed higher after the PBOC on Monday cut the amount of money banks must set aside in reserve for foreign-currency holdings, effectively boosting the domestic supply of dollars.
The prospect of slower economic expansion alongside persistent inflation is leading to a febrile mood in markets. The panoply of risks spans the pandemic, supply-chain disruptions, Fed tightening and Russia’s grinding war in Ukraine.
“It’s a question of what’s monetary policy going to look like and it’s super unknown,” Nancy Davis, chief investment officer at Quadratic Capital Management LLC, said on Bloomberg Television.
Wall Street shares closed a choppy session higher Monday after Elon Musk agreed to buy Twitter Inc. and as dip buyers emerged ahead of big-tech earnings reports.
U.S. corporate earnings are providing some solace for equity bulls -- close to 80% of firms have beaten profit expectations. Alphabet Inc., Apple Inc., Amazon.com Inc. and Meta Platforms Inc. are all due to report later this week.
“It’s a huge week for U.S. earnings,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note. While “China is the elephant in the room,” earnings matter and risk sentiment could firm up, he said.
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