Australian dollar and US futures rise on US-China hopes: Market recap

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(Bloomberg) – Futures on the Australian dollar and U.S. stocks rose in early Asian trading on Monday amid signs of improving relations between the U.S. and China, while contracts for indices of benchmark in Asia showed moderate movements.

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The Australian dollar rose slightly against the greenback, adding to its 2% rise last week – the currency’s third consecutive weekly gain against the dollar. The advance attracted hedge funds to short the currency.

Monday’s small advance follows positive signs that China-US relations will thaw, and lingering optimism that China will unleash new momentum to boost its shaky recovery.

US Secretary of State Anthony Blinken held “frank” talks with his counterpart in Beijing in a meeting that lasted longer than expected. President Joe Biden said on Saturday he hoped to meet Chinese President Xi Jinping in the coming months.

Futures on Australian and Hong Kong stocks were slightly lower, reflecting the drop in US stocks on Friday, while Japanese contracts made a small advance.

Investors are watching closely for signs of new official support for the Chinese economy after the country cut its key rate last week. The country is set to cut prime rates on one- and five-year loans in decisions expected on Tuesday, according to economists’ forecasts.

Nomura Holdings Inc., Standard Chartered Plc and Morgan Stanley said authorities could increase the quota of local government special purpose bonds to finance infrastructure investment as part of a possible stimulus package aimed at boosting the growth.

“Market expectations for political stimulus are building,” said Kinger Lau, chief equity strategist, China, for Goldman Sachs. He sees additional official support for the economy among a range of drivers that could boost Chinese stocks higher. “A number of these supportive catalysts are setting in, creating an attractive tactical market setup for stock traders to take risk on,” he said in a Monday note.

Australian bond yields fell about a basis point while those in New Zealand rose by the same amount after Treasury yields rose on Friday. A dollar index was little changed while the yen fell to the lowest level since November on an intraday basis.

US stock and bond markets will be closed for the June 16 holiday on Monday. The S&P 500 fell 0.4% on Friday to end a six-session streak as investors seek more information on the Federal Reserve’s interest rate decisions.

Fed Chairman Jerome Powell will present his semi-annual report to Congress on Wednesday. Federal Reserve Bank of St. Louis President James Bullard and his New York and Chicago counterparts are all set to speak in the coming week.

The Fed kept interest rates unchanged last week, but warned of further tightening ahead. In the past, suspending rate hikes for three months after such a series of interest rate hikes has driven stock prices higher.

“We just might have a chance to avoid the recession,” Loreen Gilbert, CEO of Wealthwise Financial, said in an interview with Bloomberg Television. “Markets are already expecting another rate hike and our baseline is that it might not even happen.”

Other key central bank developments over the coming week include policy meetings in Turkey, the UK and Switzerland.

Key events this week:

  • June 16 holiday in the United States, Monday

  • Chinese prime lending rates, Tuesday

  • Housing starts in the United States, Tuesday

  • Federal Reserve Bank of St. Louis President James Bullard speaks Tuesday

  • New York Fed President John Williams speaks on Tuesday

  • Federal Reserve Chairman Jerome Powell delivers biannual testimony to Congress before the House Financial Services Committee on Wednesday

  • Chicago Federal Reserve Chairman Austan Goolsbee speaks on Wednesday

  • Eurozone consumer confidence, Thursday

  • Tariff rulings in the UK, Switzerland, Indonesia, Norway, Mexico, the Philippines and Turkey on Thursday

  • U.S. Conference Board Leading Index, Initial Jobless Claims, Current Account, Existing Home Sales, Thursday

  • Federal Reserve Chairman Jerome Powell delivers semiannual testimony to Congress before the Senate Banking Committee on Thursday

  • Cleveland Fed’s Loretta Mester speaks, Thursday

  • Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday

  • Japan CPI, Friday

  • UK S&P Global/CIPS UK Manufacturing PMI, Friday

  • U.S. S&P Global Manufacturing PMI, Friday

  • Federal Reserve Bank of St. Louis President James Bullard speaks Friday

Some of the major movements in the markets:

Shares

  • S&P 500 futures rose 0.1% at 8:20 a.m. Tokyo time. The S&P 500 fell 0.4% on Friday

  • Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 0.7% on Friday

  • Nikkei 225 futures rose 0.1%

  • Hang Seng futures fell 0.7%

  • S&P/ASX 200 futures were little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0942

  • The Japanese yen was little changed at 141.93 per dollar

  • The offshore yuan was little changed at 7.1308 to the dollar

  • The Aussie dollar was little changed at $0.6878

Cryptocurrencies

  • Bitcoin fell 0.3% to $26,395.21

  • Ether fell 0.6% to $1,720.01

Obligations

Goods

This story was produced with assistance from Bloomberg Automation.

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