(Bloomberg) -- Stocks in Asia and US equity futures extended their advance as weak US manufacturing data damped bets on the Federal Reserve’s hawkishness.
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The MSCI Asia Pacific Index rallied more than 2% to head for its highest in a week, sparked by a broad rebound in the region. Japanese’s stock benchmark Topix rose 3%, boosted by tech shares.
Treasuries climbed across the board, with the yield on the 10-year note falling three basis points after sliding 19 basis points on Monday. Stocks and U.S. government bonds got a new lease of life after a disappointing US manufacturing report prompted traders to unwind bets for continued aggressive tightening by the Fed. The dollar fell.
Australia’s central bank surprised investors by raising interest rates by a quarter percentage point -- ending a streak of outsized increases and sending the nation’s currency and government bond yields tumbling.
Read more: Wall Street Capitulation Calls Get Ever Harder as Stocks Bounce
In the latest sign the Fed’s five rate hikes totaling 3 percentage points may be taking their toll, the Institute for Supply Management’s gauge of factory activity fell to a more than two-year low. The Fed should consider stopping its tightening campaign after one more interest-rate hike in November, according to Ed Yardeni, a market veteran who coined terms like “Fed Model” and “bond vigilante.”
Fed speakers continued the drumbeat over rate hikes. New York Fed President John Williams said the US central bank has yet to raise interest rates to levels that are restricting economic growth, and tightening still has “significant” ways to go.
“I think we’ve underestimated the pain of the stall out,” Nicole Webb, SVP and financial advisor at Wealth Enhancement Group, said on Bloomberg Television. “At some point the Fed does stop raising but however how long they hold us or suspend us there is still in question.”
China’s onshore markets will remain shut this week for holidays, while the Hong Kong exchange is closed Tuesday for the Chung Yeung Festival.
Elsewhere, oil steadied after posting the biggest one-day gain since May as the market looked to OPEC+ to deliver a substantial cut in supply.
Brazilian assets soared after President Jair Bolsonaro secured his way to a runoff election against Luiz Inacio Lula da Silva as investors cheered on the incumbent’s better-than-expected showing and bet his leftist challenger will be forced to moderate his stances in the second stretch of the race. The real was the best-performing among the world’s major currencies Monday.
Key events this week:
Eurozone PPI, Tuesday
US factory orders, durable goods, Tuesday
Fed’s John Williams, Lorie Logan, Loretta Mester, Mary Daly speak at events, Tuesday
Eurozone services PMIs, Wednesday
OPEC+ meeting begins, Wednesday
Fed’s Raphael Bostic speaks, Wednesday
The Reserve Bank of New Zealand meets, Wednesday
Eurozone retail sales, Thursday
US initial jobless claims, Thursday
Fed’s Charles Evans, Lisa Cook, Loretta Mester speak at events, Thursday
US unemployment, wholesale inventories, nonfarm payrolls, Friday
BOE Deputy Governor Dave Ramsden speaks at event, Friday
Fed’s John Williams speaks at event, Friday
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Some of the main moves in markets:
Stocks
S&P 500 futures added 1% as of 2:12 p.m. Tokyo time. S&P 500 Index rose 2.6% Monday
Nasdaq 100 futures climbed 1.2%. Nasdaq 100 Index advanced 2.4% Monday
Japan’s Topix index rose 3.1%
South Korea’s Kospi index surged 2.5%
Australia’s S&P/ASX 200 Index gained 3.8%
Currencies
The Bloomberg Dollar Spot Index was down 0.2%
The euro was up 0.1% to 0.9840 per dollar
The Japanese yen dropped 0.2% to 144.77 per dollar
The offshore yuan climbed 0.4% to 7.0790 per dollar
The British pound advanced 0.1% to 1.1331 per dollar
Bonds
The yield on 10-year Treasuries fell two basis points to 3.62%
Australia’s 10-year yield dropped 19 basis points to 3.71%
Cryptocurrencies
Bitcoin was at $19,656
Ether climbed 0.6% to $1,332
Commodities
West Texas Intermediate crude rose 0.3% to $83.87 a barrel
Gold was little changed at $1,699.41 per ounce
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