Stocks rise on outlook on interest rate cuts and earnings: markets align

(Bloomberg) — European stock futures and Asian stocks rose after the latest jobs data, supporting the case for U.S. interest rate cuts.

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The Euro Stoxx 50 contract rose 0.2%, while US counterparts posted modest gains after the S&P 500 index fell less than 1% from an all-time high on Thursday. Hong Kong shares led gains among Asian shares, while other regional benchmarks from Japan, South Korea and Australia also advanced.

“There is still quite a bit of upside potential left for both Big Tech and the S&P 500,” Daniel Yoo, head of global asset allocation at Yuanta Securities Korea, said on Bloomberg Television. Earnings growth and even a small decline in U.S. yields this year could push stocks to new records, he said.

The Hang Seng emerged following news that regulators are considering a proposal to exempt individual investors from paying taxes on dividends earned from Hong Kong shares bought through Stock Connect. Onshore Chinese stocks fluctuated as investors assessed a report saying U.S. President Joe Biden’s administration is poised to unveil a sweeping decision on China tariffs next week.

For Doug Ramsey of Leuthold, another 10% gain in the S&P 500 is not out of the question, at least statistically. He analyzed eighty years of data on bull market rallies, focusing on the rallies that occurred when unemployment was so low and the economic cycle was so mature. If the current rally reaches previous records for length and height, the S&P 500 would end the year at 5,705.

As the economy slows, unemployment rises, inflation declines and the Fed is expected to cut rates, there will be plenty of buyers for U.S. Treasuries and bonds, according to Joe Kalish of Ned Davis Research.

Treasuries were steady, with US 10-year yields remaining around 4.45%, after support from a successful $25 billion sale of 30-year US bonds.

Initial claims for US unemployment benefits rose last week to the highest level since August, exceeding expectations, while a cooling labor market supported the case for rate cuts. Mary Daly, president of the Fed Bank of San Francisco, said interest rates are currently keeping the economy in check, but it could take “more time” for inflation to return to desired levels.

“Time will tell whether this is a one-off event or part of a real cooldown in the labor market,” said Chris Larkin of Morgan Stanley’s E*Trade. “Investors may have adjusted to the idea that the Fed will wait until September to cut rates, but that doesn’t mean they have no problem waiting indefinitely.”

The story continues

Inclusion of India

The data released Friday in Asia includes industrial production for India and first-quarter current account balance for China. New loan and money supply data for China may also be released as soon as today.

Elsewhere, JPMorgan Chase & Co. said. that it is on track to include India in its emerging market bond index from June, a move expected to boost inflows from global investors. Meanwhile, Oversea-Chinese Banking Corp. S$1.4 billion ($1 billion) to buy the remaining stake in Great Eastern Holdings Ltd., which it does not currently own, in a bid to consolidate its leadership position in asset management.

Oil extended gains to a third day as key technical levels provided a floor for losses while investors digested a mixed U.S. inventory report. Gold rose after jumping more than 1% on Thursday.

Main events this week:

• UK industrial production, GDP, Friday

• ECB publishes report of April policy meeting on Friday

• Consumer Confidence at the American University of Michigan, Friday

• Chicago Fed President Austan Goolsbee will speak on Friday

Some of the major moves in the markets:

Shares

• S&P 500 futures rose 0.1% as of 6:49 a.m. London time

• Nikkei 225 futures (OSE) rose 0.5%

• Japan’s Topix rose 0.4%

• Australia’s S&P/ASX 200 rose 0.5%

• Hong Kong’s Hang Seng rose 2.1%

• The Shanghai Composite had changed little

• Euro Stoxx 50 futures rose 0.3%

• Nasdaq 100 futures rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0776

• The Japanese yen fell 0.1% to 155.65 per dollar

• The offshore yuan was little changed at 7.2277 per dollar

• The Australian dollar fell 0.2% to $0.6607

• The British pound was little changed at $1.2518

Cryptocurrencies

• Bitcoin rose 0.2% to $62,775.29

• Ether rose 0.3% to $3,030.65

Bonds

• The yield on 10-year government bonds was little changed at 4.46%

• Japan’s 10-year yield was little changed at 0.910%

• The Australian ten-year yield fell by one basis point to 4.33%

Raw materials

• West Texas Intermediate crude rose 0.8% to $79.89 a barrel

• Spot gold rose 0.5% to $2,358.67 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from April Mon.

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