Stocks Rise as First-Half’s Positive Tone Persists: Markets Wrap

(Bloomberg) — Stocks kicked off the new quarter with gains, supported by positive momentum from Wall Street and signs of moderating US inflation.

Most Read from Bloomberg

Mining and energy stocks led the advance in Europe on Monday, while a gauge of Asian equities climbed more than 1%. Shares of Asian electric-vehicle makers and related suppliers advanced, benefiting from Tesla Inc. and BYD Co. setting sales records in the second quarter. Japan’s Topix index rose as it continued to reach highs last seen in mid 1990 amid improved confidence among big manufacturers.

Futures for the S&P 500 were flat and those for the Nasdaq 100 edged up. The US tech index climbed almost 2% last week and notched its best ever first-half of a year. The S&P 500 reached the highest since April 2022 and posted its best first half since 2019.

There’s note of caution from some market watchers that stocks may not keep rising. Economic data are set to worsen in the second half and earnings will likely come under pressure, strategists at JPMorgan Chase & Co. said. The team led by Mislav Matejka said they see a disconnect in markets between current expectations for a soft landing, without a deterioration in profits, labor or credit, but at the same time belief that inflation will keep coming down and that central banks are largely done with tightening.

From the US to markets around the world, the rally in equities has generated concern as well a celebration, given how much it appears to have decoupled from a worsening economic backdrop.

Nearly $5 trillion has been added to the value of companies in the Nasdaq 100 since the start of the year, with the tech-heavy gauge defying bubble warnings and jumping almost 40%. The advance in the most-influential group in the S&P 500 helped push the index up 16% in 2023.

Story continues

Traders have been encouraged by data showing moderating inflation, even if came at the expense of growth. The personal consumption expenditures price index, one of the Federal Reserve’s preferred inflation gauges, rose 0.1% in May. From a year ago, the measure stepped down to 3.8%, the smallest annual advance in more than two years.

The dollar edged higher Monday, with most major currencies confined to narrow ranges against the greenback. Treasury yields were subdued. The offshore yuan steadied after advancing as much as 0.3% after the People’s Bank of China once again set a stronger-than-expected fix for the currency.

China’s Caixin manufacturing PMI data showed the world’s second-largest economy is still struggling to rebound. Traders were also weighing the implications of Chinese President Xi Jinping elevating a long-serving technocrat as the central bank’s top Communist Party official, which may indicate no drastic shifts in policy for now.

Gains in Chinese stocks Monday contrast with the 6% drop in MSCI Inc.’s China Index in the first half. While many investors remain wary of policy risks and China’s tepid economic rebound, some are pointing to attractive valuations.

“We’re still positive on the market, mainly from a risk-reward perspective,” James Wang, head of China strategy at UBS Group AG’s investment research unit, said on Bloomberg Television. “The market’s still trading one standard deviation cheap relative to history, two standard deviations cheap relative to the rest of the world.”

The yen fell and remained this year’s worst performing Group-of-10 currency, with traders watching for any central bank intervention should the yen depreciate further.

Key events this week:

• Eurozone S&P Global Eurozone manufacturing PMI, Monday

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

• US construction spending, ISM Manufacturing, light vehicle sales, Monday

• Australia interest rate decision, Tuesday

• US Independence Day national holiday. Financial markets closed, Tuesday

• China Caixin services and composite PMI, Wednesday

• Eurozone S&P Global Eurozone services PMI, PPI, Wednesday

• OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday

• FOMC issues minutes on June policy meeting, Wednesday

• New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday

• US initial jobless claims, trade, ISM services, job openings, Thursday

• Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday

• US unemployment rate, nonfarm payrolls, Friday

• ECB’s Christine Lagarde addresses an event in France, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.4% as of 8:17 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures rose 0.1%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 1.3%

• The MSCI Emerging Markets Index rose 1.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.2% to $1.0884

• The Japanese yen fell 0.3% to 144.75 per dollar

• The offshore yuan was little changed at 7.2648 per dollar

• The British pound fell 0.2% to $1.2680

Cryptocurrencies

• Bitcoin rose 0.2% to $30,659.61

• Ether rose 1.8% to $1,951.81

Bonds

• The yield on 10-year Treasuries was little changed at 3.84%

• Germany’s 10-year yield was little changed at 2.38%

• Britain’s 10-year yield was little changed at 4.39%

Commodities

• Brent crude fell 0.4% to $75.14 a barrel

• Spot gold fell 0.2% to $1,915.89 an ounce

This story was produced with the assistance of Bloomberg Automation.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.