European Stocks Rebound as Tech Sector Leads Gains: Markets Wrap

(Bloomberg) — European stocks snapped two days of declines, with technology leading the advance amid hopes that US curbs on chip equipment sales to China may prove lighter than feared.

The Stoxx 600 index climbed 0.5%, with tech stocks rallying the most in two weeks. Additional curbs the US is weighing on sales of semiconductor equipment and AI memory chips to China would stop short of some stricter measures previously considered, Bloomberg News reported. US equity futures ticked higher, with no cash trading later due to the Thanksgiving holiday.

Yields on benchmark French bonds rose amid worries that a budget standoff may topple the government. The rate on 10-year French notes, regarded as among the safest in the euro area, climbed to 3.03%, the same as comparable Greek bonds, which only last year were still classified as junk. Trading in Treasuries is shut.

The political turmoil in France is also weighing on the nation’s stocks, which are set for their worst under-performance against European peers since 2010. 

Chinese stocks led declines in Asia Thursday as traders awaited signals of further stimulus from policymakers in Beijing ahead of a key economic meeting next month. 

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

Talk of sanctions has underscored the persistent threat to already fragile trade relations between the US and China, weighing on sentiment in 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.

On the monetary policy front, 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, oil fell in trading reduced by the US holiday, with the focus on an upcoming OPEC+ meeting that has been delayed until Dec. 5. Meanwhile, Bitcoin traded below $96,000 after a rally on Wednesday.

Key events this week:

• Eurozone consumer confidence, Thursday
• US Thanksgiving holiday. Markets closed, Thursday
• Eurozone CPI, Friday
• ECB releases consumer expectations survey for October, Friday
• “Black Friday,” the traditional start of the US holiday shopping rush

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.5% as of 8:23 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures rose 0.2%
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index fell 0.3%
• The MSCI Emerging Markets Index fell 0.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.3% to $1.0532
• The Japanese yen fell 0.5% to 151.80 per dollar
• The offshore yuan fell 0.2% to 7.2570 per dollar
• The British pound fell 0.2% to $1.2651

Cryptocurrencies

• Bitcoin fell 1.1% to $95,363.68
• Ether fell 0.9% to $3,605.11

Bonds

• The yield on 10-year Treasuries was little changed at 4.26%
• Germany’s 10-year yield declined two basis points to 2.14%
• Britain’s 10-year yield was little changed at 4.29%

Commodities

• Brent crude fell 0.5% to $72.44 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson and Michael Msika.

©2024 Bloomberg L.P.