January 30, 2023

Stocks rebound and Treasury yields rise on stronger data

Stocks rebound and Treasury yields rise on stronger data

Empty prices are displayed in the stock price panels of the Tokyo Stock Exchange (TSE) after the Tokyo Stock Exchange temporarily suspended all trading due to system problems in Tokyo, Japan, October 1, 2020. REUTERS / Issei Kato / Files

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NEW YORK (Reuters) – A gauge of global stock markets rebounded and US Treasury yields rose on Tuesday amid easing China’s tough measures on technology and COVID-19 and strong US retail sales in April suggesting economic growth could be stronger.

The Commerce Department said retail sales rose 0.9% last month while the March data was revised higher to show sales rising 1.4% instead of 0.7% as previously reported. Read more

Jeffrey Roach, chief economist at LPL Financial, said the data shows US consumers are weathering inflationary headwinds as sales rose for the fourth consecutive month. Sales are nominal, he said, and most of the increase is due to higher prices.

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“If pricing pressures can be moderate enough to relieve some of the pressure on consumers, we expect a rebound in economic growth in the second quarter,” Roach said in an email.

US and European stocks rebounded after a positive overnight start in Asia. MSCI’s benchmark for stocks worldwide (.MIWD00000PUS.) Gaining 1.14%, while the pan-European Stoxx 600 Index rose (.stoxx) It increased by 0.96%.

On Wall Street, the Dow Jones Industrial Average (.DJI) The S&P 500 rose 0.38%. (.SPX) Gain 0.79% and the Nasdaq Composite Index (nineteenth) Added 0.93%.

Anthony Saglimpin, global market strategist at Ameriprise Financial, said the rally was in part a reaction to oversold conditions after the Nasdaq and S&P 500 posted a sixth consecutive weekly loss last week.

“There is a battle in the stock market between what collapses first: inflation or the consumer. The stock market is betting that the consumer will collapse and credit markets are betting that inflation will collapse first,” he said.

“The stock market is approaching an overcorrection and pricing in the potential for a recession I think is very high,” Saglimpin said.

The data also showed that industrial production rose 1.1% in April, with manufacturing capacity use at its highest level since 2007. Bill Adams, chief economist at Bank of Comica, said the sector is running very hot and needs to slow down until inflation is under control.

Adams said in an email that the Fed will raise the federal funds rate by half a percentage point at each of its next two policy meetings to throw some sand into the economy’s cogs.

Futures markets are pricing in consecutive gains of 50 basis points in June and July, which would put the benchmark US interest rate at 2.75% by the end of the year.

The yield on the 10-year Treasury rose 6.9 basis points to 2.948%.

The dollar fell for a third day in a row, retreating from a two-decade high against a basket of major currencies, as a rise in appetite for riskier bets slashed the dollar’s safe-haven appeal.

The dollar index fell 0.691 percent, with the euro rising 0.94 percent to $1.0529. The Japanese yen slipped 0.05% to 129.22 per dollar.

MSCI’s broadest index of Asia Pacific shares outside Japan (.MIAPJ0000PUS.) It gained 2.5%, but the index is still down 16.8% so far this year.

Concerns remain about the strength of the world’s two largest economies after weak retail and factory numbers in China and some disappointing US manufacturing data. Read more.

An index compiled by US bank Citi that monitors whether economic data is coming in better or worse than economists had been expecting, is back in negative territory.

Negative surprises

Oil hit a seven-week high, buoyed by continued pressure from the European Union to impose a ban on Russian oil imports that would tighten supply, and with investors focused on increasing demand from easing China’s coronavirus lockdowns. Read more

US crude rose 0.64 percent to $114.93 a barrel, and Brent crude rose to $114.90, up 0.58 percent on the day.

Gold prices strengthened, as the decline in the dollar bolstered demand for bullion priced in US dollars and faced pressure from the recovery in US Treasury yields. Spot gold fell 0.3% to $1,818.23 an ounce.

China batch

Hopes that China would ease two major sets of restrictions created positive mood in stocks early Tuesday.

Shanghai has achieved the long-awaited achievement of three consecutive days with no new COVID-19 cases outside the quarantine areas, which could lead to the beginning of the lifting of the city’s severe lockdown. Read more

China Mainland Index CSI300 (.CSI300) It rose 1.25% while the Hang Seng Index rose in Hong Kong (.HSI) It rose 3.27%, with tech companies listed in the city (.HSTECH) Nearly 6% jumped, hoping to ease Beijing’s crackdown on the sector.

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Additional reporting by Herbert Lash, plus reporting by Lawrence White in London and Scott Murdoch in Hong Kong; Editing by Lincoln Fest, Kirsten Donovan, Barbara Lewis and Jonathan Otis

Our criteria: Thomson Reuters Trust Principles.