US stocks rose on Monday as investors braced for this week’s inflation data and the midterm elections, while keeping a close eye on China’s Covid-19 measures.
Wall Street’s benchmark S&P 500 was up 0.8 percent and the tech-heavy Nasdaq Composite was up 0.7 percent in afternoon New York trading.
Monday session is the last session before US midterm electionswhere pollsters expect a tight race in the Senate that could cost Democrats a razor-thin majority and let Republicans win back the House, which could slow the program President Joe Biden’s expanded economic agenda.
Wells Fargo economists wrote on Monday: “If Republicans retake one or both houses of Congress, sweeping fiscal policy changes appear unlikely over the next two years, if not there is a crisis happening in 2020.”
Investors fear the impact on global economic growth of a sharp rate hike from the Federal Reserve, which last week signaled that interest rates would rise more slowly, but higher than previously expected. . A US jobs report on Friday also showed the labor market is still hot, though a small increase in the unemployment rate helped ease those concerns. A reading of inflation in the world’s largest economy, due out later this week, will help provide more clues about the trajectory of interest rate hikes.
In the government bond market, the yield on the two-year Treasury note added 0.07 percentage points to 4.72%, while the 10-year yield rose 0.04 percentage points at 4. 20%. Price falls as output increases.
Meanwhile, traders continue to bet that China will soften its zero-Covid policy, a move they hope will boost global economic growth. The dollar index, which measures the US currency against a basket of other currencies, fell 0.7%.
Chinese stocks rallied, before slashing their profits, as the government said there would be no change to its strict Covid containment measures. The number of daily Covid cases in the country hit a six-month high of 4,420 on Saturday, official data showed. Hong Kong’s Hang Seng Index rose 2.7%, while China’s CSI 300 gained 0.2%.
Emmanuel Cau, European equity strategist at Barclays, said “the rapid and widespread reopening [in China] looks very unlikely”, but “there could be a case where the authorities move to be more supportive of growth in 2023, which could be a game changer for the markets”.
Adding to the feeling of uncertainty, China’s exports also fell 0.3 percent in October year-on-year, well below economists’ forecast for a 4.3 percent rise. Imports also fell 0.7 percent, missing expectations for a 0.1 percent gain, according to customs data released Monday.
Elsewhere in Asia, Japan’s Topix was up 1% and South Korea’s Kospi was up 1%. Europe’s Stoxx 600 closed up 0.3%. The FTSE 100 fell 0.5%.
Gas prices in Europe fell sharply on Monday, with Dutch TTF gas futures, the region’s benchmark, down 10% to 108€/megawatt hour. Europe wholesale gas Prices hit an intraday high of €343/MWh in late August but fell due to relatively warm weather and larger-than-expected supply.
Investors welcomed better-than-expected German economic data. Industrial production rose 0.6 percent month-on-month in September, better than the 0.2 percent drop economists expected polled by Reuters. Even so, Franziska Palmas, an economist at Capital Economics, still thinks Europe’s largest economy will fall into a “deep recession” in the new year.
