European Stocks Set to Rebound, China Shares Slip: Markets Wrap

This content was published on November 28, 2024 - 07:59

5 minutes

(Bloomberg) — European equities were poised for gains on Thursday. Chinese stocks led declines in Asia as traders awaited signals of further stimulus from policymakers in Beijing ahead of a key economic meeting next month.

Euro Stoxx 50 futures climbed 0.7%, hinting at a rebound for the continent’s stocks after back-to-back losses. Contracts on the S&P 500 rose, while trading in Treasuries in Asia was closed to mark the Thanksgiving holiday. A gauge of Asian shares edged down Thursday, set to end the month lower.

Benchmarks in Hong Kong and mainland China fell, while stocks in Australia advanced. Shares in Japanese semiconductor-related companies jumped amid a report that the US is considering lighter-than-expected restrictions on sales of chip equipment and AI memory semiconductors to China.

Usually held in December, China’s Central Economic Work Conference typically offered a blueprint on monetary, fiscal and various industrial policies for the coming year.

The talk of sanctions underscored the persistent threat to already fragile trade relations between the US and China, which was weighing on the region. Asian equities were on pace for their first back-to-back monthly drawdown this year following the dollar’s recent advance and concerns over escalating trade tensions.

Despite optimism on the potential for further stimulus from Beijing, “there are increased concerns and frustrations,” from investors, Winnie Wu, China equity strategist for Bank of America Securities, said on Bloomberg Television. The potential for further support and the prospect of US tariffs on China mean even long-term investors “are focusing on the next three to six months, or even three to six weeks,” she said.

Yields Fall

Australian and New Zealand yields slipped, tracking moves in Treasuries on Wednesday. Investors had sought the safety of US government debt, pushing 10-year yields lower.

A pick-up in the Federal Reserve’s preferred gauge of underlying inflation is reinforcing the case for policymakers to proceed gradually with further interest-rate cuts. Traders are also weighing the expected impact of Donald Trump’s administration picks, with the US president-elect’s policies expected to reinforce price pressures.

“The lack of an upside surprise in the recent US inflation read saw rate bets lean further toward another 25 basis point Fed cut in December,” said Jun Rong Yeap, a market strategist at IG Asia Pte. This potentially helps to “offer more clarity versus the coin-flip rate scenario priced just a week ago.”

Weakening Yen

The yen weakened to moderate Wednesday’s gain of more than 1% against the greenback which drove it to the strongest since late October. The move came amid views that the Bank of Japan may raise interest rates at its December meeting.

The nation’s cabinet was also set to approve a $92 billion extra budget to finance Prime Minister Shigeru Ishiba’s stimulus package, according to state broadcaster NHK.

The Japanese currency is “unlikely to trade below 150 for any significant amount of time given still-wide interest rate differentials that continue to favor the dollar,” Win Thin, global head of markets strategy at Brown Brothers Harriman & Co., wrote in a note.

Elsewhere, the Mexican peso advanced after President-elect Donald Trump held talks with Mexico’s president Claudia Sheinbaum. South Korea’s won weakened as the Bank of Korea unexpectedly cut interest rates 25 basis points to 3%.

In commodities, gold was little changed, while silver prices fell Thursday. Oil treaded water as OPEC+ was expected to delay a production restart. Meanwhile, Bitcoin traded below $96,000 after a rally on Wednesday.

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