Dow Futures Higher On China Data, Recovery Bets; Bond Yields Cap Gains

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The Monday Market Minute

  • Global stocks trade cautiously higher following stronger-than-expected China economic data as traders eyed U.S. Treasury yields ahead of this week’s Fed policy meeting.
  • Benchmark 10-year note yields hold at 1.62% in overnight trading as domestic data continues to point to a strong post-pandemic recovery.
  • CDC data shows 107 million coronavirus vaccine doses have been administered as of yesterday, with nearly 36 million now fully inoculated.
  • Oil nears closer to the $70 mark following a surge in China energy consumption, with U.S. gasoline demand at a post-pandemic high.
  • U.S. equity futures suggest a firmer open on Wall Street ahead of February retail sales data Tuesday, the Fed statement Wednesday and earnings from Nike and FedEx on Thursday.

Wall Street futures traded cautiously higher Monday, with investors looking to stronger-than-expected economic data from China, as well as the ongoing recovery in the United States, to consolidate recent gains while carefully tracking the relentless rise in Treasury bond yields. 

Retail sales and industrial output in the world’s second largest economy surged more than 30% over the first two months of the years, data from China’s official statistics office indicated Monday, cementing a powerful start to the year following its full-flight exit from the coronavirus pandemic in late 2020.

The strength of its industrial sector, particularly as it relates to an appetite for oil and energy, lifted global crude prices closer to the $70 mark in overnight trading and added to a broadening sentiment that global growth, supported by $1.9 trillion in U.S. stimulus spending, could outpace forecasts over the second half of the year. 

It’s also accelerated bets on near-term interest rate increases, given that benchmark 10-year Treasury notes are trading at 1.62% and have been on the rise for seven consecutive weeks, the longest streak since 2009, heading into the Federal Reserve’s two-day policy meeting that ends on March 17.

Yields are likely to push higher, as well, given that the underlying U.S. fundamentals remain strong — even without the added kick to President Joe Biden’s $1,400 checks and $300 in enhanced unemployment benefits — with data last week showing the lowest weekly jobless claims in four months and the strongest consumer sentiment reading in more than year.

Wall Street futures, however, suggest stocks are ready to push ahead despite the flashing inflation signals, with contracts tied to the Dow Jones Industrial Average indicating a 150 point opening bell gain and those linked to the S&P 500 priced for a 12 point move to the upside.

Nasdaq Composite futures are looking at a more modest 35 point gain at the start of trading , lead by early advances for Apple  (AAPL) – Get Report, Advanced Micro Devices  (AMD) – Get Report and Square  (SQ) – Get Report.

In Europe, stocks opening with solid early gains as a weaker euro and improving vaccine rollouts boosted sentiment, with the Stoxx 600 rising 0.6% and Britain’s FTSE 100 adding 0.4%. 

Overnight in Asia, China stocks extended their recent slump despite the stronger-than-expected readings for retail sales and industrial output, pulling the region-wide MSCI ex-Japan index 0.47% lower heading into the final hours of trading. The Nikkei 225 in Tokyo, meanwhile, added 0.17% to close at 29,766.978 points ahead of a key Bank of Japan policy review later this week.

Away from equities, the U.S. dollar index inched higher against a basket of its global currency peers to trade at 91.78 as Treasury yields continued to rise, while bitcoin fell 7.8% from its first-ever trade over the $60,000 mark to trade at $55,300.00.

Brent crude contracts for May delivery, the global benchmark for pricing, were marked 52 cents higher at $69.74 per barrel following the China data reading, while WTI contracts for April added 52 cents to $66.13 per barrel.