U.S. Futures Rise With Europe Stocks as Yuan Gains: Markets Wrap




 

(Bloomberg) -- U.S. equity futures rose alongside European stocks while Asian shares fell after China moved to stabilize its currency, helping ease some of the market turmoil that kicked off the week.

The global sell-off in equities abated after China fixed its yuan exchange rate at stronger than 7 per dollar, a key level that when breached in markets on Monday fueled the rout. Three main U.S. stock-index futures all gained along with Stoxx Europe 600, while the benchmark MSCI Asia Pacific Index fell for a fifth session. The yen pulled back from its strongest closing level in more than one year. Bitcoin advanced, with its week-long rally carrying the digital token back above $12,000 for the first time three weeks.

The dollar nudged lower and gold held on to Monday's gains. The pound strengthened as opponents of a no-deal Brexit hardened their plans to stop Prime Minister Boris Johnson from possibly trying to leave the European Union with no agreement. Treasuries gave back some of their surge from yesterday, when they reached the most extreme yield-curve inversion since the lead-up to the 2008 financial crisis. Oil edged higher.

Investors are contemplating the week's brutal start that was triggered by yet another escalation in the trade struggle between the two largest economies. China's move to stabilize the yuan on Tuesday offered some reassurance. But it came too late to avoid the "manipulator" designation that could open the door to new penalties on top of the tariff hikes already imposed on Chinese goods. U.S. Treasury Secretary Steven Mnuchin will now "engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China's latest actions," the department said in a statement.

For its part, China said the recent yuan depreciation was decided by the market, not Beijing, and denied the Trump administration's accusation.

"The key thing is that they've shown they are willing to play with that 7 level," Andrew Sullivan, Pearl Bridge Partners director, said on Bloomberg TV. "The market really doesn't have a firm grip on how far the currency could go."

Elsewhere, Australia's dollar rebounded, only briefly trimming gains after its central bank kept rates unchanged at record lows and said "an extended period" of low rates will likely be required. The country's bonds rallied, sending the 10-year yield below 1% for the first time. Japanese rates fell below the central bank's target range.

These are some key events to watch out for this week:

Earnings from financial giants include: UniCredit, AIG, ABN Amro Bank, Standard Bank, Japan Post Bank.Central banks with rate decisions Wednesday include India and New Zealand.A string of Fed policy makers speak this week, including St. Louis chief James Bullard on Tuesday and Chicago's Charles Evans a day later. Both are Federal Open Market Committee voters.

Here are the main moves in markets (all sizes and scopes are on a closing basis):

Stocks

Futures on the S&P 500 Index jumped 0.9% as of 6:11 a.m. New York time, set for the largest climb in six weeks.The Stoxx Europe 600 Index increased 0.5%, the biggest advance in more than a week.The U.K.'s FTSE 100 Index rose 0.1%, the first gain in more than a week.Germany's DAX Index increased 0.6%, the biggest climb in more than a week.The MSCI Asia Pacific Index declined 0.8%, hitting the lowest in almost seven months with its fifth straight decline.

Currencies

The Bloomberg Dollar Spot Index decreased 0.1%.The euro was little changed at $1.12.The British pound jumped 0.4% to $1.2196, the biggest increase in more than two weeks.The Japanese yen fell 0.4% to 106.38 per dollar, the largest fall in more than a week.The onshore yuan climbed 0.4% to 7.025 per dollar, the biggest increase in six weeks.

Bonds

The yield on 10-year Treasuries jumped four basis points to 1.75%, the largest surge in more than three weeks.Britain's 10-year yield rose one basis point to 0.521%, the first advance in more than a week.Germany's 10-year yield decreased two basis points to -0.53%, hitting the lowest on record.

Commodities

Gold was little changed at $1,464.21 an ounce, the highest in more than six years.West Texas Intermediate crude climbed 0.4% to $54.93 a barrel.Iron ore dipped 2.7% to $93.20 per metric ton, reaching the lowest in more than seven weeks on its fifth consecutive decline.

--With assistance from David Ingles, Cormac Mullen and Andreea Papuc.

To contact the reporter on this story: Laura Curtis in London at lcurtis7@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Todd White

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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