(Bloomberg) — Stocks climbed on Friday while the dollar and bond yields fell as investors looked to inflation readings for clues on the path of interest rate hikes.
Most Read from Bloomberg
European and US futures moved higher ahead of producer price data later Friday and after the S&P 500 notched its first advance this month. A benchmark of Asian equities headed for a sixth weekly gain, the longest such stretch in two years.
Chinese shares rose as factory-gate prices contracted while consumer inflation eased, giving the nation’s central bank some room to ease policy to foster economic recovery from the impact of the pandemic. Chinese property shares extended gains on expectations of more government support.
Investors are taking heart from any signs of softness in prices that may allow policymakers around the world to be less hawkish and more supportive of growth. While central banks like the Federal Reserve want to see this cooling in inflation, the market reaction is problematic when it buoys financial assets too much.
The dollar dropped for the third day and against most of its major counterparts in the Group-of-10 currency basket as demand for haven investments eased. The yen and offshore yuan strengthened.
Treasury yields declined, with 10-year rate hovering at 3.45%. Government bond yields also moved lower in Australia while Japan’s benchmark 10-year yield fell by half a basis point.
Friday’s US producer price index for November is one of the final pieces of data Federal Reserve policymakers will see before their Dec. 13-14 meeting. The PPI in October cooled more than expected. Meanwhile there are some signs the labor market is cooling, with continuing jobless claims climbing to the highest since early February.
Still, strategists from Morgan Stanley to JPMorgan Chase & Co. have warned investors against piling back into risk on hopes the Fed is getting close to pivoting to easier policy.
“We know that generally inflation should be coming down, so the Fed should be able to stop around 4.75% or 5% as the market is currently pricing in,” Esty Dwek, chief investment officer at Flowbank SA, said on Bloomberg Television. “My worry at some point next year is if inflation plateaus or stops falling and the Fed has to reprice more rate hikes that we take another leg down.”
JPMorgan Asset Management sees more room for equities to decline from the current levels. “We still think next year it’s going to be a pretty downbeat outlook for the global economy, given all the tightening we have seen so far this year,” Sylvia Sheng, global multi-asset strategist, said on Bloomberg Television.
Meanwhile, comments from Li Keqiang were supportive of sentiment in Hong Kong and mainland markets, with the Chinese premier saying that stable prices have left the nation further room for macro policy adjustments as it tries to bolster economic growth.
JPMorgan strategist Marko Kolanovic said he “remains positive on China, due to favorable monetary conditions as well as an eventual full reopening and end of Covid.”
Elsewhere in markets, oil rose Friday while heading for a weekly drop of around 10% after a volatile session on Thursday on concerns over economic outlook. Gold advanced for a fourth day.
Key events this week:
US PPI, wholesale inventories, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
S&P 500 futures rose 0.2% as of 6:41 a.m. London time. The S&P 500 rose 0.8%
Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 1.2%
Euro Stoxx 50 futures rose 0.4%
Japan’s Topix index rose 1%
Hong Kong’s Hang Seng Index rose 2.4%
China’s Shanghai Composite Index rose 0.4%
Australia’s S&P/ASX 200 index rose 0.5%
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.0576
The Japanese yen rose 0.5% to 136.03 per dollar
The offshore yuan was little changed at 6.9582 per dollar
Bitcoin rose 0.2% to $17,212.74
Ether was little changed at $1,278.8
West Texas Intermediate crude rose 0.8% to $72.02 a barrel
Spot gold rose 0.3% to $1,795.19 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth and Rob Verdonck.
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.