Stocks Rise on Biden Tariff Comments; Dollar Drops: Markets Wrap

(Bloomberg) -- Stocks and the yuan advanced after President Joe Biden said China tariffs imposed by the Trump administration were under consideration. The dollar and Treasuries retreated.

US equity futures rose amid expectations bargain hunters will help pull the S&P 500 back from bear-market levels. Energy and basic resources led gains in Europe’s Stoxx 600 Index, while Asian and emerging markets shares climbed.

The euro rose to its highest level in four weeks and most of the region’s bonds fell after European Central Bank President Christine Lagarde said the ECB is likely to start raising interest rates in July and exit sub-zero territory by the end of September. Treasuries dropped as investors debate the Federal Reserve’s tightening path amid mounting worries about an economic slowdown. 

Traders interpreted Biden’s comments that he’ll discuss the US tariffs on Chinese imports with Treasury Secretary Janet Yellen when he returns from his Asia trip as a signal there could be a reversal of some Trump-imposed measures. 

“Today’s appetite for risk has been sparked by the US President’s announcement that trade tariffs imposed on China by the previous Trump administration will be discussed,” said Pierre Veyret, a technical analyst at ActivTrades. “Investors see this as a possible de-escalation of the trade war between the two economic superpowers, and this has revived trading optimism towards riskier assets.”

Separately, Biden said the US military would intervene to defend Taiwan in any attack from China, comments that appeared to break from the longstanding US policy of “strategic ambiguity” before they were walked back by White House officials. Meanwhile, his administration announced that a dozen Indo-Pacific countries will join the US in a sweeping economic initiative designed to counter China’s influence in the region.

Among notable moves in premarket trading, VMware surged after Bloomberg News reported that Broadcom is in talks to acquire the cloud-computing company. Antiviral and vaccine stocks also rose amid spreading cases of the monkeypox virus.

In Europe, oil stocks rose with crude prices and Siemens Gamesa Renewable Energy SA rallied after Siemens Energy AG made a takeover offer. Base metals extended their rebound from a five-month low as the demand outlook was bolstered by the weaker dollar. 

Ukraine President Volodymyr Zelenskiy reinforced his call for embargoes on oil, technology and other trade with Russia, and said there should be no exceptions in sanctions on the country’s banking sector.

Equities have been volatile as investors assess the impact of China’s Covid policies and monetary tightening on the outlook for the world’s largest economies. Beijing reported a record number of cases, reviving concerns about a lockdown. 

Minutes of the most recent Fed rate-setting meeting will give markets insight this week into the US central bank’s tightening path. St. Louis Fed President James Bullard said the central bank should front-load an aggressive series of rate hikes to push rates to 3.5% at year’s end, which if successful would push down inflation and could lead to easing in 2023 or 2024.

“As macro-economic concerns stemming from aggressive monetary tightening, the Russia-Ukraine conflict and China’s stringent Covid lockdowns persist, we anticipate great volatility in the market,” Louise Dudley, portfolio manager global equities at Federated Hermes Ltd., said in a note.

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Here are some key events to watch this week:

• Atlanta Fed President Raphael Bostic, Kansas City Fed President Esther George speak at events Monday
• ECB Governing Council members Robert Holzmann and Joachim Nagel, BOE Governor Andrew Bailey discuss inflation at event Monday
• Eurozone S&P Global PMIs Tuesday
• US new home sales, S&P Global PMIs Tuesday
• Reserve Bank of New Zealand rate decision Wednesday
• FOMC minutes Wednesday
• ECB publishes its Financial Stability Review Wednesday
• Bank of Korea rate decision Thursday
• US GDP, initial jobless claims Thursday
• US core PCE price index; personal income and spending; wholesale inventories; University of Michigan consumer sentiment Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 rose 0.9% as of 6:45 a.m. New York time
• Futures on the Nasdaq 100 rose 0.7%
• Futures on the Dow Jones Industrial Average rose 0.8%
• The Stoxx Europe 600 rose 0.7%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.7%
• The euro rose 1% to $1.0665
• The British pound rose 0.8% to $1.2574
• The Japanese yen rose 0.3% to 127.49 per dollar

Bonds

• The yield on 10-year Treasuries advanced four basis points to 2.82%
• Germany’s 10-year yield advanced three basis points to 0.98%
• Britain’s 10-year yield advanced three basis points to 1.92%

Commodities

• West Texas Intermediate crude rose 1.1% to $111.48 a barrel
• Gold futures rose 1% to $1,867.40 an ounce

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