Global stocks were headed for the best week in more than two months, buoyed by bets on Chinese stimulus and exuberance surrounding artificial intelligence firms.
(Bloomberg) — Global stocks were headed for the best week in more than two months, buoyed by bets on Chinese stimulus and exuberance surrounding artificial intelligence firms.
The MSCI World Index has climbed 3% this week, the most since the end of March. Asian stocks staged a broad rally on Friday and European equities climbed. US futures steadied as the S&P 500 capped a sixth day of gains on Thursday — its longest winning run since November 2021.
Bets that the Federal Reserve will end its tightening cycle sooner rather than later after this week’s pause in interest-rate hikes have increased appetite for riskier assets, while expectations are growing that China’s government will boost spending. That helped lift mining, energy and some luxury stocks in Europe trade Friday.
“Theres a lot of cash on sidelines and we should not underestimate investors’ willingness to step in,” said Georgios Leontaris, chief investment officer for Switzerland and EMEA at HSBC Global Private Banking and Wealth.
A $4.2 Trillion Options Event Looms for Newly Minted Bull Market
Investors’ fervor will face a big test on Friday, with the expiration of a massive amount of options contracts tied to stocks and indexes. The event, known as OpEx, generally sees traders either rolling over existing positions or starting new ones. That usually involves portfolio adjustments that lead to a spike in volume and sudden price swings.
In Europe, consumer shares led gains and LVMH contributed the most to the advance in the Stoxx 600 Index. Asos Plc rose as much as 7.8% after the fashion retailer’s sales update showed turnaround progress.
In the US, Adobe Inc. shares rose as much as 3.9% in premarket trading after earnings beat expectations and analysts were optimistic about its AI potential. Apple Inc., nearing a $3 trillion market capitalization, was steady.
The tech rally has upended some bearish analyst calls. Bank of America Corp.’s Michael Hartnett said he was wrong in the first half because the US economy has avoided a recession and a credit crunch, and called the AI-driven tech rally an “unanticipated event.” Still, he drew parallels to 2000 or 2008, warning of a “big rally before big collapse.”
Treasury yields rose across the curve and the dollar edged higher. The euro was little changed after rallying the most since April on Thursday following the European Central Bank’s decision to lift interest rates by another quarter-point. ECB President Christine Lagarde said a further hike in July was likely.
“The euro area has more of an inflation problem than the US and therefore the ECB will continue to hike, at least to 4%,” Christian Kopf, head of fixed income and FX for Union Investment Privatfonds GmbH said in an interview with Bloomberg Television.
That’s amid warning signs of fragility flashing elsewhere — European natural gas prices eased Friday, after the previous day’s huge price swings caused by a series of small outages at gas facilities in Norway and the planned shutdown of a key production site in the Netherlands.
Benchmarks in China, Hong Kong Australia and South Korea climbed. Japanese shares rose while the yen fell, after the Bank of Japan kept is negative rate and yield curve control program unchanged.
Ueda Holds Stimulus as BOJ Side Steps Tightening Wave for Now
“The decision should not have been a surprise,” said John Vail, chief global strategist at Nikko Asset Management. “Anyone who shorts the yen versus the dollar must realize that the authorities will likely intervene with little warning if it gets much weaker.”
Key events this week:
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 4:58 a.m. New York time
- Nasdaq 100 futures rose 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.6%
- The MSCI World index rose 0.3%
- The MSCI Asia Pacific Index rose 0.9%
- The MSCI Emerging Markets Index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0954
- The British pound was little changed at $1.2796
- The Japanese yen fell 0.5% to 141.03 per dollar
- The offshore yuan was little changed at 7.1148 per dollar
Cryptocurrencies
- Bitcoin was little changed at $25,523.5
- Ether was little changed at $1,668.75
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.74%
- Germany’s 10-year yield was little changed at 2.50%
- Britain’s 10-year yield declined three basis points to 4.36%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures rose 0.3% to $1,975.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth, Sujata Rao and Michael Msika.
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