Stocks rise as inflation data takes center stage: Markets overview

(Bloomberg) — Stocks rose on Friday, while the dollar and bond yields fell as investors looked to inflation readings for clues on the path of interest rate hikes.

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European and U.S. futures rose ahead of data on manufacturing prices later on Friday and after the S&P 500 posted its first gain this month. The benchmark Asian shares headed for a sixth weekly gain, the longest stretch in two years.

Chinese shares rose as factory prices contracted while consumer inflation eased, giving the nation’s central bank some room to ease policy to boost economic recovery from the impact of the pandemic. Chinese property stocks extended gains on expectations of more government support.

Investors are jittery at any sign of easing prices, which could allow policymakers around the world to be less aggressive and more supportive of growth. While central banks like the Federal Reserve want to see this cooling of inflation, the market response is problematic when it stimulates financial assets too much.

The dollar fell for a third day against most of its major peers in the Group of 10 currency basket as demand for safe-haven investments eased. The yen and offshore yuan strengthened.

Treasury yields fell, with the 10-year yield hovering at 3.45%. Government bond yields also fell in Australia, while Japan’s benchmark 10-year yield fell half a basis point.

Friday’s US producer price index for November is one of the last data Federal Reserve policymakers will see before their December 13-14 meeting. October’s PPI cooled more than expected. Meanwhile, there are some signs that the labor market is cooling, with jobless claims continuing to rise to their highest level since early February.

Still, strategists from Morgan Stanley to JPMorgan Chase & Co. warned investors not to pile back into risk on hopes that the Fed is close to moving to easier policy.

“We know that overall inflation should be coming down, so the Federal Reserve should be able to hold off around 4.75% or 5% as the market is pricing in right now,” said Esti Dweck, chief investment officer at Flowbank SA, according to Bloomberg Television. “My concern at some point next year is if inflation plateaus or stops falling and the Federal Reserve has to reassess more rate hikes to take another leg down.”

JPMorgan Asset Management sees more upside for the stock from current levels. “We still think next year will be a pretty bad outlook for the global economy given all the tightening we’ve seen so far this year,” Sylvia Sheng, global multi-asset strategist, told Bloomberg Television.

Meanwhile, comments from Li Keqiang supported sentiment in Hong Kong and mainland markets, with the Chinese premier saying stable prices left the nation with additional scope for macro policy adjustments as it tries to support economic growth.

JPMorgan strategist Marko Kolanovic said he “remains positive on China, due to favorable monetary conditions, as well as an eventual full reopening and end to Covid.”

Elsewhere, oil rose on Friday, heading for a weekly decline of around 10% after a volatile session on Thursday on concerns about the economic outlook. Gold advanced for a fourth day.

Key events this week:

  • US PPI, wholesale stocks, University of Michigan consumer sentiment, Friday

Some of the major moves in the markets:

Stock up

  • S&P 500 futures were up 0.2% at 6:41 a.m. London time. S&P 500 rose 0.8%

  • Nasdaq 100 futures rose 0.3%. Nasdaq 100 rose 1.2%

  • Euro Stoxx 50 futures rose 0.4%

  • Japan’s Topix index rose 1%

  • Hong Kong’s Hang Seng index rose 2.4%

  • China’s Shanghai Composite rose 0.4%

  • Australia’s S&P/ASX 200 rose 0.5%

Currencies

  • The Bloomberg Dollar Spot Index was down 0.2%

  • The euro rose 0.2% to $1.0576

  • The Japanese yen rose 0.5% to 136.03 per dollar

  • The offshore yuan was little changed at 6.9582 per dollar

Cryptocurrencies

  • Bitcoin rose 0.2% to $17,212.74

  • Ether was little changed at $1,278.8

Bonds

Goods

  • West Texas Intermediate crude rose 0.8% to $72.02 a barrel

  • Spot gold rose 0.3% to $1,795.19 an ounce

This story was created using Bloomberg Automation.

–With help from Rita Nazareth and Rob Verdonck.

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