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U.S. equity futures bumped higher again Tuesday, with Treasury yields adding to recent gains and the dollar holding steady, as investors react to a surprise China stimulus package and a series of dovish signals on interest rates from Federal Reserve officials.
Stocks closed modestly higher Monday, with a solid reading of S&P Global’s business activity reading for the month of September adding to evidence of a resilient economy and comments from a trio of Fed officials indicating support for more and deeper rate cuts into the end of the year.
The solid PMI data, however, as well as last week’s better-than-expected reading for August retail sales and jobless claims, has nudged Treasury yields higher over the past few sessions as the Fed’s dovish tilt, set against the still-expanding economy, looks to raise renewed inflation risks.
Benchmark 2-year Treasury note yields were last marked 4 basis points higher from yesterday’s levels at 3.605%, with a $69 billion auction of new notes later in the session, while 10-year notes rose 5 basis points to 3.791%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.07% lower at 100.784, although the dollar was trading at a three-week high of 144.28 against the Japanese yen.
Inflation pressures could be mollified by events overnight in China, however, where People’s Bank of China Governor Pan Gongsheng unveiled the most comprehensive stimulus package from the world’s second-largest economy in nearly a decade.
Short term rate cuts, easier balance sheets rules for domestic banks, new housing market support and a plan to boost stock prices were all unveiled in a rare press event Tuesday, suggesting President Xi Jinping is growing increasing concerned over the economy’s moribund post-pandemic performance.
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Should China use the stimulus to stoke its export sector, the resulting deflation in global goods prices could put downward pressure on inflation readings in major economies around the world.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are priced for a 10 point opening bell gain while those linked to the Dow Jones Industrial Average suggest a 52 point bump from last night’s record close.
The tech-focused Nasdaq, meanwhile, is price for a 60 point advance, with Nvidia (NVDA) , Tesla (TSLA) and Intel (INTC) pacing the early gainers.
In other markets, Gold prices hit a fresh all-time high of $2,639.95 per ounce in overnight trading, powered in part by dovish rate comments from Fed officials, while oil prices leaped after Israel hit dozens of Hezbollah-controlled areas in southern Lebanon amid the country’s expanding military operations around the region.
WTI crude futures for November delivery, the U.S. pricing benchmark, were last seen trading $1.75 higher at $72.12 per barrel.
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In overseas markets, China’s aggressive stimulus, as well as more rate cut signaling from the European Central Bank, lifted stocks firmly higher in Europe, with the Stoxx 600 rising 0.71% in Frankfurt and Britain’s FTSE 100 rising 0.27% in London.
Overnight in Asia, China stocks soared on the news of the new support packages, helping the regional MSCI ex-Japan benchmark rise 1.35% into the close of trading. The Nikkei 225, meanwhile, ended 0.57% on its return from the Monday equinox holiday.
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