Stocks, Bonds Rise as US Data Spurs Rate-Cut Bets: Markets Wrap
(Bloomberg) — Asian stocks rose alongside Treasuries after softer US jobs data strengthened bets on a Federal Reserve interest-rate cut, boosting market sentiment.
The MSCI Asia Pacific Index gained 0.3%. While technology shares opened lower, they shrugged off the weakness and futures contracts for the Nasdaq 100 index rose as much as 0.5%. Advanced Micro Devices Inc. jumped 4.8% in extended US trading after it predicted accelerating sales growth. SoftBank Corp. fell 3.5% in Tokyo after selling its stake in Nvidia Corp.
Job figures from ADP Research signaled the labor market slowed in the second half of October, sending bonds higher across the curve. The 10-year yield dropped four basis points to 4.08% as money markets added to bets on Fed rate cuts, pricing roughly a 70% chance of a reduction next month. A gauge of the dollar edged up after five days of losses, while gold fell.
The US government’s closure had heightened the importance of private data such as ADP, with investors deprived of key official indicators to gauge the strength of the economy. The record shutdown is now on track to end as soon as Wednesday, after the Senate passed a temporary funding measure that buoyed stocks as investors brace for a flood of delayed data once agencies reopen.
“As government functions resume, we expect a clearer read on the economic data, an important step for assessing the underlying strength of US activity,” said Rajeev De Mello, a global macro portfolio manager at Gama Asset Management. “Investor positioning is adjusting to a confluence of supportive factors.”
US companies trimmed 11,250 jobs per week on average in the four weeks ended Oct. 25, according to data released Tuesday by ADP Research. The firm’s most recent monthly report, released last week, showed private-sector payrolls increased 42,000 in October after declining in the prior two months.
The data come after an array of companies flagged plans to reduce headcount in recent weeks. A report from outplacement firm Challenger, Gray & Christmas Inc. showed employers announced the most job cuts for any October in more than two decades, spurring anxiety about the health of the labor market.
“The market will be guided by the general risk vibe and Fedspeak, but we suspect it will be unable to establish consistent directional impetus,” Westpac Banking Corp. strategists Damien McColough and Uma Choudhury wrote in a note.
The reopening of the US government now depends on the House, which plans to return to Washington to consider the spending package. It would keep most of the government open through Jan. 30 and some agencies through Sept. 30.
If approved, the bill goes to President Donald Trump, who has already endorsed the legislation.
What Bloomberg strategists say…
Global equities may struggle to regain full momentum unless the path to central bank easing in the US and other major economies becomes clearer. AI bubble angst is also playing a role, but then that is obscuring the headwind for stocks being generated by expectations that the pace of interest-rate cuts is set to slow down.
— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.
The resumption of economic data releases could make the case for increased wagers on rate cuts. Most economists surveyed by Bloomberg suggest that Fed officials will lower borrowing costs by a quarter-point at their Dec. 9-10 meeting. But the central bank’s path remained foggy after Chair Jerome Powell last month said a cut is not a certainty, a sentiment since shared by others at the Fed.
Mentions of “economic slowdown” and synonyms during sales, guidance and earnings calls tracked by Bloomberg are the lowest since 2007. And this is playing out as the S&P 500 heads for a third year of high returns, with stocks as expensive as they were at their post-pandemic peak.
“Overall, the trend remains positive,” said Louis Navellier at Navellier & Associates. “New highs by year-end are definitely on the table, especially if the Fed cuts in December and takes a more dovish stance.”
Corporate News:
Advanced Micro Devices Inc., Nvidia Corp.’s nearest rival in AI chips, predicted accelerating sales growth over the next five years, driven by strong demand for its data center products. FedEx Corp. expects profit this quarter to improve from a year ago, easing investor concerns about a lackluster holiday season and volatile trade policies. JD.com Inc. said orders surged nearly 60% during this year’s Singles’ Day event. Adani Enterprises Ltd. offered stock to existing shareholders at a 24% discount for a rights issuance that aims to raise 249.3 billion rupees ($2.8 billion). Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 1:12 p.m. Tokyo time Japan’s Topix rose 0.6% Australia’s S&P/ASX 200 was little changed Hong Kong’s Hang Seng rose 0.6% The Shanghai Composite fell 0.2% Euro Stoxx 50 futures rose 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro was little changed at $1.1575 The Japanese yen fell 0.2% to 154.40 per dollar The offshore yuan was little changed at 7.1215 per dollar Cryptocurrencies
Bitcoin rose 0.7% to $103,335.57 Ether rose 0.6% to $3,438.41 Bonds
The yield on 10-year Treasuries declined four basis points to 4.08% Japan’s 10-year yield declined one basis point to 1.680% Australia’s 10-year yield declined two basis points to 4.37% Commodities
West Texas Intermediate crude fell 0.3% to $60.84 a barrel Spot gold fell 0.5% to $4,106.62 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu, Masaki Kondo and Matthew Burgess.
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