US stocks rebound, bonds gain on dovish central-bank moves

Bloomberg

US equity futures extended a rebound and European stocks rallied as markets continued to recover from a brutal selloff at the start of the week. Caution was on display, however, as bonds gained while currencies were roiled by a series of dovish central-bank moves in Asia.
Futures on all three major US benchmarks turned higher following a surge in the underlying gauges. The Stoxx Europe 600 index rose for the first time in four days, led by technology stocks after Microchip’s upbeat demand outlook. Chemicals producers advanced after Bayer and Lanxess agreed to sell their stakes in Currenta, while Glencore fell after its profits missed estimates. Shares were mixed but calmer in Asia, with Japanese stocks closing barely changed while equities in Shanghai declined.
New Zealand’s dollar tumbled after a bigger-than-expected rate cut, and Australia’s dollar dropped to a decade-low on speculation its central bank will follow suit. The yuan dipped after China set its reference rate slightly weaker than expected. The yen gained and gold rallied toward $1,500 an ounce. India’s rupee fluctuated and the Thai baht slipped after policy makers in both countries lowered borrowing costs.
The 10-year Treasury yield fell through 1.7 percent and German rates dropped to a record after industrial production in the euro-region’s biggest economy registered the biggest annual decline in almost a decade. The euro declined with the pound and the US dollar was steady.
Traders remain on tenterhooks after recent moves, which included the biggest one-day plunge in global equities since February 2018. An escalation in the trade war between the world’s two biggest economies continues to unnerve investors, even after China said recent yuan depreciation was decided by the market, not Beijing.
“We’re likely to see perhaps another shoe drop as the week progresses because this is not getting fixed,” Kristina Hooper, the Atlanta-based chief global market strategist at Invesco Ltd, told Bloomberg TV. “There really is the potential for it to get worse from here.”
The dovish moves by three Asian central banks showed that policy makers still have some power to surprise, and underscore the global shift toward easier policy even after the Federal Reserve‘s unexpectedly hawkish stance. Disappointing data may push the European Central Bank to turn toward easier monetary policies when it meets next month.
Elsewhere, Brent crude extended a decline after closing in a bear market on Tuesday. Emerging-market stocks edged higher, heading for the first gain in 11 days.
The Stoxx Europe 600 Index climbed 1 percent in New York. Futures on the S&P 500 Index gained 0.4 percent. The MSCI All-Country World Index increased 0.2 percent. The UK’s FTSE 100 Index advanced 0.9 percent, the first advance in more than a week.
The Bloomberg Dollar Spot Index increased 0.1 percent. The euro fell 0.2 percent to $1.1182. The British pound decreased 0.2 percent to $1.2144. The Japanese yen advanced 0.2 percent to 106.27 per dollar. New Zealand’s dollar sank 1.4 percent to $0.6435, hitting the weakest in more than three years. The Australian dollar sank 0.4 percent to 0.673 per dollar, the weakest in more than 10 years. The onshore yuan sank 0.3 percent to 7.044 per dollar.
The yield on 10-year Treasuries declined four basis points to 1.67 percent, reaching the lowest in almost three years. Germany’s 10-year yield decreased five basis points to -0.59 percent, hitting the lowest on record. Britain’s 10-year yield declined six basis points to 0.455 percent, the lowest on record. Japan’s 10-year yield dipped one basis point to -0.191 percent, the lowest in about three years.