Growth bets look set to overtake inflation concerns, at least for the moment, as stock futures react to some rare positive news on Covid from China.
U.S. equity futures traded higher Tuesday, while the dollar slipped lower against its currency market peers and oil prices jumped, as investors reacted to some rare positive news on Covid from China in hopes of finding a spark that could ignite global growth prospects into the second half of the year.
With central banks around the world essentially standing shoulder-to-shoulder in their inflation flight, vowing to lift interest rates and withdraw liquidity in order to blunt demand and tame consumer price increases, growth metrics have slowed and recession bets have increased.
China’s move last night, however, to halve the amount of time inbound visitors must spend in quarantine, to seven days, suggests the world’s second-largest economy may be finally prepared to awaken from its months-long slumber.
Set against data showing no new infections in both Shanghai and Beijing on Tuesday — the first time that’s happened since February — and investors were more than happy to move out of risk-free assets such as Treasury bonds and the dollar in overnight trading.
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The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% lower at $103.84 while benchmark 10-year note yields edged higher, to 3.247%, in early European trading.
Oil prices were also on the rise, buoyed by both bets on China demand and comments caught by a live microphone at the G-7 summit in Germany, where French President Emmanuel Macron told U.S. President Joe Biden that major producers such as Saudi Arabia and the United Arab Emirates could only make modest increases to their output capacity.
G-7 leaders also said they would look into ways in which they could ban cross-border shipments of Russian crude sold above a pre-set price as part of a broadening package on sanctions on Moscow linked to its war on Ukraine.
WTI futures for August delivery were marked $1.83 higher in early New York trading at $111.40 per barrel while Brent contracts for the same month, the global pricing benchmark, jumped $2.07 to $117.16 per barrel.
Global stocks got a boost, with the Asia region MSCI ex-Japan benchmark rising 0.42% and Japan’s Nikkei 225 gaining 0.66%. European stocks were also off to a solid start, with the Stoxx 600 rising 0.75% in Frankfurt.
On Wall Street, where the S&P 500 remains on pace for its worst first half start since 1970, stock futures were looking solid, with contracts tied to the benchmark indicating a 23 point opening bell advance.
Those tied to the Dow Jones Industrial Average were priced for a 195 point gain while futures linked to the tech-focused Nasdaq were indicating a 68 point advance.
Morgan Stanley (MS) – Get Morgan Stanley Report lead bank stocks higher in pre-market trading, pacing gains for Wall Street rivals such as Goldman Sachs (GS) – Get Goldman Sachs Group Inc. (The) Report, Wells Fargo (WFC) – Get Wells Fargo & Company Report and Bank of America (BAC) – Get Bank of America Corporation Report, as the country’s biggest lenders unveiled dividend hikes in the wake of the Federal Reserve’s annual bank stress tests.
Nike (NKE) – Get Nike Inc. Report shares fell 2.5% after the world’s biggest sports apparel group cautioned the surging transport costs, as well as a strong U.S. dollar, would eat into profit margins over its coming financial year.
Playtika Holding (PLTK) – Get Playtika Holding Corp. Report shares surged 14% following a report that suggested that Joffre Capital is looking to buy a majority stake the online casino gaming group.
