Stocks rise as US inflation data still suggest rate cuts

European and US equity futures rose Monday as US inflation figures did little to alter views that the Federal Reserve will cut interest rates this year.

Benchmarks also gained in mainland China and South Korea, while Japanese equities fell after a report showed confidence among the country’s large manufacturers weakened slightly for the first time in four quarters. Elsewhere, gold jumped to a record price, adding impetus to a rally that’s also been driven by geopolitical tensions and robust Chinese demand.

Markets in Australia and Hong Kong were shut for a holiday.

China’s CSI 300 Index climbed as much as 1.8%, the most since Feb. 29, as a rebound in manufacturing activity reinforced hopes that the nation’s economic recovery may be starting to gain traction.  

“Emerging optimism about China is real,” said Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank in Singapore. It may gain traction given “corresponding optimism elsewhere in Asia that dovetails with an upturn in global manufacturing,” he said.

Global equities have gained over 18% in the previous two quarters, driven by bets on interest-rate cuts and artificial intelligence stocks. Those themes will remain front and center of investor’s minds as markets head into the new period.

Treasury yields and a Bloomberg index of the dollar inched lower after Federal Reserve Chair Jerome Powell said Friday that the central bank’s preferred gauge of inflation was “pretty much in line with our expectations.” Powell added that it wouldn’t be appropriate to lower rates until officials are sure inflation is in check. Investors are betting the US central bank will make that first cut in June. 

The core personal consumption expenditures price index — which excludes volatile food and energy costs — rose 0.3% in February after climbing in the previous month, marking its biggest back-to-back gain in a year. The measure is up 2.8% from a year earlier, still above the Fed’s 2% target.

“You have a Fed that at the moment is highly data dependent,” said Matthew Luzzetti, chief US economist at Deutsche Bank. “Until we get either confirmation or a different view on what the data are going to be, it’s kind of hard to gauge exactly where we end up from a Fed policy perspective.” 

In Asia, the yen held close to a three-decade low against the greenback as Japanese officials continued to threaten intervention. The nation’s automobile stocks took a beating, led by Toyota Motor Corp., following weak industry confidence data damped sentiment and investors booked profits in the new fiscal year.

A plunge in auto production caused by a temporary halt by Daihatsu Motor Co. dragged down related sectors, Bloomberg Economics’ Taro Kimura wrote in a note on the Bank of Japan’s Tankan survey. The sentiment reading for large makers of motor vehicles led declines, sliding by 15 points.

In commodities, iron ore fell to the lowest in 10 months as China’s years-long property crisis continued to pressure prices. 

Elsewhere, Bitcoin fell after earlier trading above $71,000. The largest digital currency has jumped almost 70% this year amid persistent demand for US exchange-traded funds holding the token.

Key events this week:

• US construction spending, ISM Manufacturing, Monday
• Bank of Canada issues business outlook and survey of consumer expectations, Monday
• Eurozone S&P Global Manufacturing PMI, Tuesday
• France S&P Global Manufacturing PMI, Tuesday
• Germany S&P Global / BME Manufacturing PMI, CPI, Tuesday
• India HSBC/S&P Global Manufacturing PMI, Tuesday
• Mexico international reserves, Tuesday
• South Korea CPI, Tuesday
• Spain unemployment, Tuesday
• UK S&P Global / CIPS Manufacturing PMI, Tuesday
• US factory orders, light vehicle sales, JOLTS job openings, Tuesday
• Brazil industrial production, Wednesday
• Eurozone CPI, unemployment, Wednesday
• Hong Kong retail sales, Wednesday
• US ISM Services, Wednesday
• Eurozone S&P Global Services PMI, PPI, Thursday
• India services PMI, Thursday
• US initial jobless claims, trade, Thursday
• Eurozone retail sales, Friday
• France industrial production, Friday
• Germany factory orders, Friday
• Hong Kong PMI, Friday
• India rate decision, Friday
• Japan household spending, Friday
• Philippines CPI, Friday
• Russia GDP, Friday
• Singapore retail sales, Friday
• South Korea current account balance, Friday
• US unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.4% as of 7:40 a.m. London time
• Nasdaq 100 futures rose 0.5%
• The Shanghai Composite rose 1.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0788
• The Japanese yen was little changed at 151.36 per dollar
• The offshore yuan was little changed at 7.2531 per dollar
• The Australian dollar was little changed at $0.6522
• The British pound was little changed at $1.2625

Cryptocurrencies

• Bitcoin fell 1.8% to $69,602.16
• Ether fell 2.4% to $3,545.31

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.19%
• Japan’s 10-year yield advanced 1.5 basis points to 0.740%

Commodities

• West Texas Intermediate crude rose 0.3% to $83.40 a barrel
• Spot gold rose 1.4% to $2,262.06 an ounce

This story was produced with the assistance of Bloomberg Automation.