Asian stocks are poised to open higher Tuesday, buoyed by Wall Street gains as US stocks extended their storming rally and a $16 billion sale of 20-year Treasuries lured bond buyers.
Futures in Japan, Hong Kong and Australia pointed to solid starts, after the S&P 500 had its strongest close since August and the Nasdaq 100 hit a 22-month high. Shortly after the US bond auction results on Monday, US 10-year yields reversed course and fell to around 4.4%.
Both Nvidia Corp. — which will report quarterly results Tuesday — and Microsoft Corp. climbed to fresh peaks amid a revival of the artificial-intelligence bid. In late US trading, Zoom Video Communications Inc. rose on better-than-expected sales. The dollar dropped to an 11-week low.
“We remain positive on equities and expect a broadening of the rallies recently experienced as the US economy continues on a sustainable economic expansion albeit at a modest pace,” said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management.
In Asia, nervousness lingers over the strength of China’s economic recovery, and particularly for its struggling property sector. China Vanke Co., Seazen Group Ltd. and Longfor Group Holdings Ltd. are among a list of about 50 developers that may be eligible for support from bank loans, debt and equity financing, Bloomberg reported.
Traders have also been fixated on Treasury sales, especially after the US recently offered an unusually large premium to sell 30-year securities. Those auctions have been exerting a growing sway over stocks, underscoring how the path of interest rates is gripping markets of late. The 20-year bond auction drew yields of 4.78%, compared with the pre-sale level of 4.79%.
After a more than three-decade hiatus, the Treasury resurrected 20-year bonds in May 2020. Before Monday’s auction, it had not sold the securities during the Thanksgiving week. They’ve traded at a discount to other long-term maturities — which caused a degree of apprehension ahead of the sale.
“Treasuries offer extremely attractive yields,” according to Principal Asset Management. “And while the potential for capital appreciation might be limited in the face of an impending economic slowdown, the assurance of a steady income from Treasuries makes them a solid option for investors prioritizing stability heading into an uncertain 2024.”
Read: Fed’s Barkin Says Inflation Job Not Done; Growth Easing to Trend
As the earnings season winds down, investors will be on the lookout for results from a handful of retailers and tech companies.
Nvidia’s results could exceed sky-high investor expectations thanks to strong demand for generative AI. Best Buy Co., Nordstrom Inc. and Lowe’s Cos. are set to post slumping sales, reflecting the slowdown in discretionary spending.
Read: Nvidia Set to Post Another Sales Surge Amid AI Boom: Preview
The S&P 500 is set to rise toward its all-time high early next year, pullback midyear and then rally back toward the highs, according to strategists at Societe Generale SA.
“The S&P 500 should be in ‘buy-the-dip’ territory, as leading indicators for profits continue to improve,” wrote Manish Kabra. “Yet, the journey to the end of the year should be far from smooth” he added, citing an economic downturn, a looming credit selloff, and ongoing quantitative tightening as hurdles traders still need to face.
To some market watchers, the S&P 500’s rally is looking increasingly unsustainable. Strategists tracked by Bloomberg predicted on average in mid-October that the gauge would end the year at 4,370 — but it is already been trading above 4,500.
Read: Five Key Charts to Watch in Global Commodities This Week
And as the dollar rally stalled, it will take some firm real-sector data to challenge the current dovish Fed narrative, according to Win Thin, global head of currency strategy at Brown Brothers Harriman & Co.
“The US economy continues to grow above trend even as the rest of the world slips into recession, while price pressures remain persistent enough that the Fed will not be able to cut rates as soon and by as much as the market thinks,” Thin noted. “That said, the dollar remains vulnerable until we see a shift in market sentiment and expectations.”
Elsewhere, oil extended gains as traders boosted bets that the OPEC+ alliance will intervene in the market to bolster prices.
Corporate Highlights:
- Nearly all of OpenAI’s employees have threatened to quit and follow ousted leader Sam Altman to work at the company’s biggest investor, Microsoft, unless the current board resigns, leaving the future of the high-profile artificial intelligence startup increasingly uncertain.
- Boeing Co. rallied after Deutsche Bank AG upgraded the shares to buy as aircraft deliveries are beginning to accelerate.
- NRG Energy Inc. is replacing Chief Executive Officer Mauricio Gutierrez following a dispute over the company’s $2.8 billion acquisition of Vivint Smart Home Inc. — a transaction Elliott Investment Management LP has called the “worst deal” of the decade in the power and utilities industry.
- Bayer AG dropped the most in its history after suffering major courtroom and drug-development setbacks that raise pressure on its new leader to outline a turnaround plan.
- Bristol Myers Squibb Co. and 2seventy bio Inc. slumped after saying the Food and Drug Administration will convene an advisory committee meeting to review data around an application for a cancer drug, and that a decision on the application won’t be made by the target action date of Dec. 16.
- C3.ai Inc., a software maker that has worked to capitalize on interest in artificial intelligence, cut workers last week, citing employee performance and the need for cost savings.
Key events this week:
- ECB President Christine Lagarde and German Finance Minister Christian Lindner speak, Tuesday
- US existing home sales, Tuesday
- FOMC issues minutes from the Nov. 1 policy meeting, Tuesday
- Nvidia’s earnings, Tuesday
- Canada’s update to the government’s fiscal and economic outlook, Tuesday
- Eurozone consumer confidence, Wednesday
- US initial jobless claims, University of Michigan consumer sentiment, durable goods, Wednesday
- Bank of Canada Governor Tiff Macklem speaks, Wednesday
- Eurozone S&P Global Manufacturing & Services PMI, Thursday
- Thanksgiving holiday — US markets closed — Thursday
- ECB publishes account of October policy meeting, Thursday
- Germany IFO business climate, Friday
- US S&P Global Manufacturing PMI, Friday
- Black Friday, traditional kick-off for the US holiday shopping season
- ECB’s Christine Lagarde speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.7%
- The Nasdaq 100 rose 1.2%
- Hang Seng futures rose 1% as of 7:31 a.m. Tokyo time
- S&P/ASX 200 futures rose 0.3%
- Nikkei 225 futures rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro was unchanged at $1.0940
- The Japanese yen was little changed at 148.37 per dollar
- The offshore yuan was little changed at 7.1678
Cryptocurrencies
- Bitcoin rose 0.4% to $37,556.13
- Ether rose 0.3% to $2,032.7
Bonds
- The yield on 10-year Treasuries declined two basis points to 4.42% on Monday
- Australia’s 10-year yield declined two basis points to 4.48% on Tuesday
Commodities
- West Texas Intermediate crude rose 2.3% to $77.60 a barrel on Monday
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
