Stocks jump on China shares; bonds flash post-Fed concern

Bloomberg

Stocks jumped on Thursday on a surge in Chinese technology shares and as traders digested the Federal Reserve’s view that a robust US economy can weather the campaign against high inflation now underway.
An Asia-Pacific equity index rises about 3%, boosted by China’s effort to stabilize its markets, which was unveiled a day ago. US and European futures climbed after the S&P 500’s best two-day advance since 2020. Possible progress on Russia-Ukraine cease-fire talks is also helping sentiment.
The Federal Reserve raised rates by a quarter percentage point and signalled hikes at all six remaining meetings in 2022. Chair Jerome Powell said the US economy is “very strong” and can handle monetary tightening.
Treasuries advanced, while a portion of the bond curve — the gap between five- and 10-year yields — inverted for the first time since March 2020. For some, the latter highlights a growing risk that the Fed’s efforts to rein in inflation could trigger an economic downturn.
The dollar was steady and the yen hovered near a six-year low. Oil snapped a three-day drop but remains down more than 10% for the week.
The Fed said it would begin allowing its $8.9 trillion
balance sheet to shrink at
a “coming meeting,” without elaborating. The US central bank is among a number from Brazil to the UK that are raising borrowing costs. The commodity shock from Russia’s war in Ukraine is continuing to aggravate price pressures and economic risks, portending more market volatility.
“Our view is that the Fed put is just a lot lower,” said Mary Nicola, a global multi-asset portfolio manager at PineBridge Investments, referring to the notion that US policy makers may be slower to step in to help financial markets if they hit turbulence.
“If we put aside the current geopolitical situation and just focus on the US economy, the US consumer, their household balance sheets are in a much better position than they were post the global financial crisis,” she said.
After the latest round of peace talks, a Russian spokesman said a neutral Ukraine with its own army is a possible compromise, while Kyiv said it needs security guarantees. President Joe Biden said the US would send Ukraine drones and thousands of anti-aircraft and anti-tank missiles.
S&P 500 futures rose 0.2% of 7 am in London. The S&P 500 rose 2.2%.
While Nasdaq 100 futures added 0.4%. The Nasdaq 100 rose 3.7%, Japan’s Topix index climbed 2.5% and South Korea’s Kospi index increased as much as 1.3%.
Australia’s S&P/ASX 200 Index climbed 1.1% and Hong Kong’s Hang Seng Index surged 5.9%. While China’s Shanghai Composite Index rises 1.4%, Euro Stoxx 50 futures added about 0.5%.
The Japanese yen was at 118.82 per dollar and the offshore yuan was at 6.3630 per dollar.
While the Bloomberg Dollar Spot Index was steady, the euro was at $1.1039.
The yield on 10-year Treasuries fell three basis point to 2.16% and Australia’s 10-year yield increased one basis point to 2.51%.