(Bloomberg) -- European stocks climbed in muted trade on Monday as gains in energy companies outweighed concerns over mixed policy signals from China.
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TotalEnergies SE, Shell Plc and BP Plc were among the biggest contributors to Europe’s Stoxx 600 equity benchmark as crude oil rose for a third day and gas prices jumped amid threats of supply disruptions from a potential strike in Australia. Trading volumes were about a third lower than usual. US futures contracts were steady.
A gauge of Asian stocks dropped for the seventh day in the longest losing streak since June 2022. The Hang Seng Index declined as much as 2% and shares in mainland China fell 1.4%.
Confusion over China’s approach to stemming the nation’s property slump strained sentiment. Chinese lenders cut the one-year loan prime rate by 10 basis points and kept the five-year prime loan rates unchanged even after policymakers called for more lending. Traders had expected a 15-basis-point cut on both rates.
Yields climbed across tenors, bringing the 10-year’s back on its path toward the highest level since November 2007 and the 30-year’s near 2011 highs, as a selloff in the Treasury market this month wiped out what was left of year-to-date gains. Wary investors are facing entrenched inflation and the prospect of more policy tightening ahead of the annual Jackson Hole, Wyoming, gathering of central bankers later this week.
Federal Reserve Chairman Jerome Powell is expected to strike “a more balanced tone in Wyoming, hinting at the tightening cycle’s end while underscoring the need to hold rates higher for longer,” according to Anna Wong at Bloomberg Economics.
The mood in equity markets has soured since the start of the month, when traders were pricing in a rosy outlook of peak rates in sight and a resilient US economy pointing to a soft landing. The recent surge in bond yields, combined with still-hawkish rhetoric from central bankers and a deteriorating outlook in China have challenged the optimistic view.
Investors who chased the rally earlier this year are now bulking up on hedges in preparation for risks confronting the market. The put/call ratio spiked to highest since March last week, while volatility has jumped to the most elevated level since May in the US and in Europe.
A gauge of dollar strength traded little changed, following small losses Thursday and Friday that trimmed its five weeks of gains. Meanwhile, the offshore yuan fell against the greenback. The People’s Bank of China had earlier set the daily reference rate for the yuan at a level stronger than the average estimate in a Bloomberg survey.
European natural gas prices soared as workers serving a key export project in Australia prepare for a strike if no deal is reached in pay talks on Wednesday. Benchmark Dutch front-month gas soared as much as 18% on Monday morning as the possibility of supply disruptions in Australia, which may affect 10% of global liquefied natural gas exports keeps European traders on edge.
Oil rose for a third day as signs the physical market is tightening and a stall in the dollar’s rally offset growing demand risks in China and the US.
Key events this week:
US existing home sales, Tuesday
Chicago Fed’s Austan Goolsbee speaks, Tuesday
Eurozone S&P Global Services & Manufacturing PMI, consumer confidence, Wednesday
UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
US new home sales, S&P Global Manufacturing PM, Wednesday
US initial jobless claims, durable goods, Thursday
Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
Japan Tokyo CPI, Friday
US University of Michigan consumer sentiment, Friday
Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.3% as of 8:25 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures rose 0.1%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.4%
The MSCI Emerging Markets Index fell 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0886
The Japanese yen was little changed at 145.38 per dollar
The offshore yuan fell 0.2% to 7.3194 per dollar
The British pound was little changed at $1.2741
Cryptocurrencies
Bitcoin fell 0.8% to $26,031
Ether fell 1.1% to $1,671.35
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.28%
Germany’s 10-year yield was little changed at 2.63%
Britain’s 10-year yield was little changed at 4.68%
Commodities
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Brett Miller, Qizi Sun and Ameya Karve.
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2023-08-21 07:30:02Z
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