Stocks, US Futures Gain as China Covid Cases Ease: Markets Wrap
- Shanghai reported zero virus cases found in the community
- Monetary tightening, China lockdowns are shaping sentiment
Most Asian stocks rose Wednesday amid a China rally sparked by declining Covid cases, which spurred hopes that growth-sapping lockdowns could be loosened. Treasuries were steady ahead of a US inflation report.
Mainland Chinese bourses rose more than 1.5%, while technology stocks rallied in Hong Kong. New infections fell in Shanghai and the city reported none in the community. The cases were instead detected in quarantine facilities.
A Wall Street advance Tuesday also brought some respite from this year’s equity rout, which has been fueled by fears of an economic downturn as borrowing costs jump. U.S. and European futures pushed higher.
Treasury yields were little changed and a dollar gauge remained near the highest level since 2020 as investors parsed Federal Reserve comments on tightening monetary policy. Oil climbed past $101 a barrel.
Meanwhile, Chinese inflation data showed factory-gate prices rose 8%, faster than expected. The US consumer-price index later is expected to moderate but stay above 8%. Disruptions linked to Russia’s war in Ukraine and China’s outbreak are stoking the cost of living.
Investors are looking for any evidence that the price pressures sapping the global economy are peaking.
A high US print “will give the Fed license to raise rates even faster” and would be very bad for technology stocks, Ellen Hazen, chief market strategist at F.L. Putnam Investment Management Co., said on Bloomberg Television.
Fed Outlook
Fed officials reinforced Chair Jerome Powell’s message that half-point hikes are on the table in June and July. But Cleveland Fed President Loretta Mester told Bloomberg Television that “we don’t rule out 75 forever,” referring to a more aggressive, three-quarter-point increase.
The “bar is low” for a surprise from the US inflation data amid ebbing consumer sentiment, according to Brent Schutte, chief investment strategist at Northwestern Mutual Life Insurance Co.
“Things are going to be just a bit better at the margin,” he said. “The Fed overall is going to tighten less. That will lead to a market that begins to find its feet and move higher in coming quarters as inflation does come off the boil.”
Elsewhere, Ukraine and Russia clashed over natural gas sent via pipelines to Europe in a spat that could disrupt supplies. Prices for the commodity jumped.