US futures advance as tech stocks rally; dollar declines

Bloomberg

US equity-index futures gained on Thursday as technology shares rallied on the penultimate trading day of what’s been a brutal year for financial markets.
Contracts on the tech-heavy Nasdaq 100 rose more than 0.6% following gains for Asian technology stocks earlier amid signs China is easing a regulatory crackdown. Contracts on the S&P 500 were up about 0.3%. Tesla Inc. climbed more than 3% in premarket trading, with tech giants including Amazon.com Inc. and Netflix Inc. also among the biggest gainers. Treasuries were steady and a gauge of the dollar declined.
The tech rally was a small ray of light as the year draws to a close with investors again focused on risks arising from the spread of Covid-19. The US said it would require inbound airline passengers from China to show a negative Covid-19 test prior to entry. In Italy, health officials said they would test arrivals from China after almost half of passengers on two flights from China to Milan were found to have the virus.
Hong Kong removed limits on gatherings and testing for travellers in a further unwinding of its last major Covid-19 rules, offering a boost to the global economy but sparking concerns it would amplify inflation pressures and prompt US policy makers to maintain tight monetary settings.
“Investors are going into 2023 with a cautious mind-set, prepared for more rate hikes, and expecting recessions around the globe.” said Craig Erlam, a senior market analyst at Oanda Europe Ltd. “And then there’s China and its U-turn on Covid-19 prevention. It’s been quite the shift from fighting every case to living with the virus and that creates enormous uncertainty for the start of the year.”
The Stoxx Europe 600 index erased losses to trade little changed, with gains for technology stocks offsetting declines for retail and consumer-focused shares.
Global equities have lost a fifth of their value in 2022, the largest decline since 2008 on an annual basis, and an index of global bonds has slumped 16% amid sticky inflation and rising interest rates.
Data showed the Federal Reserve’s aggressive tightening policy has taken a toll on the housing market. US pending home sales fell for a sixth consecutive month in November to the second-lowest on record. Borrowing costs have roughly doubled since the start of the year and home sales have been declining for months.
Elsewhere in markets, oil dipped amid thin liquidity as investors weighed the fallout from a Russian ban on exports to buyers that adhere to a price cap.
“We expect the economy to slow materially or enter recession at some point in 2023,” wrote Nancy Tengler, CEO and chief investment officer at
Laffer Tengler Investments.
“A severe recession would be bearish for stocks, yet given the resilience of the US economy and the tight labour market, we are expecting a slowdown or shallow and brief recession. That could allow stocks to rally in the second half of 2023,” she said.
The Stoxx Europe 600 fell 0.1% as of 9:21 am London time and S&P 500 futures rose 0.3%.
While Nasdaq 100 futures rose 0.6%, futures on the Dow Jones Industrial Average rose 0.1%. The MSCI Asia Pacific Index fell 0.6% and the MSCI Emerging Markets Index also plunges by 0.5%.
The Bloomberg Dollar Spot Index fell 0.3% and the euro rose 0.2% to $1.0638.
While the Japanese yen rose 0.6% to 133.62 per dollar, the offshore yuan rose 0.3% to 6.9768 per dollar. The British pound rose 0.2% to $1.2044.
The yield on 10-year Treasuries declined three basis points to 3.85% and Germany’s 10-year yield declined two basis points to 2.48%.