Stocks wobble as China bets fade; dollar stalls

Bloomberg

Global stocks trimmed gains and US equity-index futures dropped on concern the Federal Reserve will keep borrowing costs higher for longer. Optimism over China’s economic recovery that drove a rally in Asia fizzled in
European hours.
The Stoxx Europe 600 Index erased an advance, falling for a second day. The Shanghai Composite Index earlier climbed the most since November. Treasury futures were lower as investors assessed hawkish comments by Federal Reserve officials. The dollar took a breather from a three-week rally. Trading volumes were thin amid a US holiday.
A chorus of investors including Goldman Sachs Group Inc. is betting on Chinese equities to resume a rally as the world’s second-biggest economy deepens stimulus and relaxes pandemic restrictions. While this has sparked inflows into global assets tied to the Chinese economy, the broader sentiment in markets remains impaired, with the Fed resolute on its fight against inflation. Growing geopolitical tensions are also preventing investors from turning more bullish.
“The only place where the central bank will remain soft enough is China, to recover from a series of absurd Covid-19 measures that pushed the economy into
an unnecessary depressed zone,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note.
Europe’s Stoxx 600 was dragged by technology stocks. In China, stocks gained after a Goldman report that pencilled in a rebound on the back of an earnings recovery. Calls for further stimulus via lower rates also built up, prompting the nation’s banks to keep their lending rates unchanged.
Contracts on the S&P 500 and Nasdaq 100 indexes fell 0.3% each and Treasury futures fell across the curve. Stocks ended last week on a muted note after Richmond Fed President Thomas Barkin and Fed Governor Michelle Bowman both expressed their support for continued rate hikes. That followed hawkish remarks by St. Louis Fed President James Bullard and Cleveland President Loretta.
Oil futures advanced. Demand from China will climb by 800,000 barrels a day in 2023, according to median estimate of 11 China-focused consultants surveyed by Bloomberg News. That would take consumption to an all-time high of about 16 million barrels a day, survey showed.
The Stoxx Europe 600 fell 0.1% as of 9:44 am London time and S&P 500 futures also drop as much as 0.3%.
While Nasdaq 100 futures fell 0.3%, futures on the Dow Jones Industrial Average fall by around 0.2%.
The MSCI Asia Pacific Index rose 0.6% and the MSCI Emerging Markets Index rose 0.5%.
The Bloomberg Dollar Spot Index was little changed and the euro was also little changed at $1.0685.
While the Japanese yen was little changed at 134.13 per dollar, the offshore yuan rose 0.1% to 6.8648 per dollar and the British pound was little changed at $1.2026.