(Bloomberg) -- Stocks in Asia climbed on Friday, bolstered by the possibility of major stimulus in China as well as hopes that policy makers can get inflation under control without causing a global economic downturn.
Japan, Hong Kong and China helped an Asian share index to add about 1%. US and European equity futures fluctuated after the best Wall Street session in two weeks swept up everything from speculative investments to technology titans.
China may let local governments sell 1.5 trillion yuan ($220 billion) of special bonds in the second half. The cash would mostly be used for infrastructure spending to shore up an economy hit by Covid lockdowns and a housing slump.
Such outlays could aid commodities like metals and oil, which traded around $102 a barrel. The dollar dipped and Treasuries were steady, leaving the US 10-year yield near 3%. Bitcoin scaled $22,000 for the first time this month.
Meanwhile, two Federal Reserve policy makers pushed back Thursday against fears of a recession as monetary settings tighten. Governor Christopher Waller and St. Louis Fed President James Bullard backed the need for restrictive policy to curb price pressures but argued the US can avert a contraction.
As ever in a year of marked volatility and steep losses, the question is whether the tilt in market narrative away from recession fears toward the fabled soft landing is anything more than temporary.
“Looking nine months out, I think we’ll still have a period where we’re going to see lower corporate earnings and those lower corporate earnings are still going to give us, I would say, another 15% possible downside” for stocks, Cheryl Smith, portfolio manager at Trillium Asset Management LLC, said on Bloomberg Radio.
Portions of the US yield curve remain inverted, which for some is a sign that the threat of recession is elevated. High bond volatility also points to great uncertainty. All eyes will be on the US jobs report on Friday for further clues about the Fed’s policy path.
Elsewhere, the pound rose after Boris Johnson announced his intention to resign as British prime minister, easing the political chaos in the UK.
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What to watch this week:
- US employment report for June, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 10:54 a.m. in Tokyo. The S&P 500 rose 1.5%
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 2.2%
- Japan’s Topix index rose 1.2%
- Australia’s S&P/ASX 200 index advanced 0.7%
- South Korea’s Kospi index climbed 1.1%
- China’s Shanghai Composite index rose 0.1%
- Hong Kong’s Hang Seng index added 0.6%
- Euro Stoxx 50 futures increased 0.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was at $1.0177
- The Japanese yen was at 136.04 per dollar
- The offshore yuan was at 6.6991 per dollar
Bonds
- The yield on 10-year Treasuries was at 2.99%
- Australia’s 10-year bond yield rose three basis points to 3.50%
Commodities
- West Texas Intermediate crude was at $102.17 a barrel, down 0.6%
- Gold was at $1,743.71 an ounce
