Global Markets Rebound, Recession Fears Ease, Hopes For Stimulus Grow

Global markets rebound as recession fears ease and hopes for aggressive stimulus grow.
Thomas Hughes

The U.S. Futures Are Sharply Higher In Early Trading

The U.S. futures are sharply higher in early Monday trading as fear of recession begins to ease. The NASDAQ Composite is in the lead with a gain near 1.35% while the Dow Jones Industrials and S&P 500 are both up near 1.10%. The move is driven in large part to bond yields and rising hopes of economic stimulus. Bond yields rebound in early trading widening the spread between the two and ten-year. The bad news is that rates remain near their recent lows and the yield curve is flat.

Also aiding stocks this morning is a growing expectation for easing central bank policy. This week Jerome Powell is slated to deliver the opening speech at the Jackson Hole conference and the market has high hopes he will confirm deep rate cuts are coming. Banks moved higher by 2.0% in today’s early trading despite the prospects of declining interests rates.

In trade news, the White House has granted Huawei an extension to buy sensitive products from the U.S., a move that helped send the entire tech complex higher. Chip stocks are among the early leaders with gains in the range of 1.0% to 2.0%.

European Indices Move Higher As Recession Fears Ease

The European markets are broadly higher at midday on Monday. The German DAX is in the lead with a gain of 1.48% while the FTSE and CAC are close behind. The move is driven by a combination of reduced recession fear coupled with increased stimulus expectations. In terms of stimulus, Germany’s Finance Minister came out in support of the economy but said Berlin had plenty of cash available if a stimulus was needed. Shares of Deutsche Bank surged on the news gaining more than 4.0%.

Action in the UK was positive if muted after a leaked document painted a bleak picture for the nation after a no-deal Brexit. The document, part of a “worst-case scenario”, were allegedly leaked by a disgruntled rival of Boris Johnson in an attempt to undermine his leadership. In stock news, Novartis was the biggest buzz after it was reported an insider sold shares a few weeks before negative news was released. Shares advanced despite the allegation rising 0.8%.

China Vows To Reform Interest Rate Policy To Lower Real Interest Rates

Asian markets are broadly higher after Monday’s session. The Shanghai and Hang Seng are in the lead with gains greater than 2.10% each. The moves are driven by news from the PBOC. The PBOC says it will reform interest policy processes in order to help reduce real interest rates. The move is effectively a rate cut if one that may not be felt in the near-term. The Nikkie advanced 0.71% on strength from Family Mart which is up 8.73% on strong results. Australia advanced 0.97%, Korea 0.66%.

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