U.S. Stocks May See Further Upside In Early Trading

The major U.S. index futures are currently pointing to a slightly higher open on Tuesday, with stocks likely to add to the modest gains posted in the previous session.

Strength in overseas markets may carry over onto Wall Street after China’s central bank announced a slew of stimulus measures.

At a press conference on Tuesday, People’s Bank of China Governor Pan Gongsheng said the bank would reduce the reserve requirement ratio by 50 basis points.

The bank also framed measures aims to support the property market. The minimum down payment ratio for second homes will be reduced to 15 percent from 25 percent. The bank intends to cut the existing mortgage rates and bring it closer to the new mortgage rates.

Further, Pan said the PBoC would establish a swap program for securities, funds and insurance companies to secure liquidity from the central bank through asset collateralization.

U.S. stocks closed higher on Monday and the Dow and S&P 500 posted record highs, although the gains were just marginal, as investors largely made cautious moves ahead of some crucial economic data and Fed speeches.

Reports on durable goods orders, new home sales and consumer confidence are likely to attract attention this week along with a report on personal income and spending that includes the Fed’s preferred inflation gauge.

The Dow ended up by 61.29 points or 0.2 percent at 42,124.65. The S&P 500 closed up 16.02 points or 0.3 percent at 5,718.57, while the Nasdaq settled with a gain of 25.95 points or 0.1 percent at 17,974.27.

The undertone was positive amid optimism about the outlook for the economy following the Federal Reserve’s interest rate cut last week.

The Fed is expected to continue lowering rates in the coming months amid signs of slowing inflation even as the economy remains relatively strong.

“Markets on Wall Street are still fired up after the Fed’s outsized interest rate cut last week and the anticipation that further cuts are on the way sooner rather than later,” said Danni Hewson, head of financial analysis at AJ Bell.

She added, “Looking at today’s market movements investors seem to feel the Fed’s got its playbook in order and that any cuts are being timed to keep the economy firing and to avoid a damaging slowdown.”

The markets also benefited from a notable advance by shares of Intel (INTC), with the semiconductor giant jumping by about 3 percent.

The rally by Intel came after a report from Bloomberg said Apollo Global Management (APO) has offered to make a multibillion-dollar investment in the company.

Commodity, Currency Markets

Crude oil futures are surging $1.68 to $72.05 a barrel after falling $0.63 to $70.37 a barrel on Monday. Meanwhile, after rising $6.30 to $2,652.50 an ounce in the previous session, gold futures are inching up $1.70 to $2,654.20 an ounce.

On the currency front, the U.S. dollar is trading at 143.93 yen compared to the 143.60 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1143 compared to yesterday’s $1.1112.

Asia

Asian stocks advanced on Tuesday after China’s central bank unveiled its biggest stimulus since the pandemic to support the economy and counter a prolonged downturn in the property sector.

The central bank said it would lower borrowing costs and inject more liquidity into the system that would free up more money for lending. Regulators also unveiled plans to support stable development of the stock market.

The dollar index regained some ground after having plunged to a nearly 14-month low following remarks by two Federal Reserve officials supporting last week’s big interest rate cut.

Gold held steady near record level in Asian trading and oil prices jumped more than 1 percent amid concerns about the intensifying conflict between Israel and Hezbollah.

China’s Shanghai Composite Index spiked 4.2 percent to 2,863.13, marking its biggest single-day gain in more than two years. Hong Kong’s Hang Seng Index soared 4.1 percent to 19,000.56.

Japanese markets ended higher as traders returned from a holiday. The Nikkei 225 Index rose 0.6 percent to 37,940.59 as the BoJ Governor’s cautious comments on inflation dampened speculation of an October rate hike. The broader Topix Index settled 0.5 percent higher at 2,656.73.

Japan’s factory activity shrank more than expected in September, but further expansion in the service sector supported overall business momentum, a survey showed today.

Seoul stocks rallied, driven by hopes for further U.S. rate cuts and China stimulus optimism. The Kospi climbed 1.1 percent to 2,631.68, extending its winning streak to a sixth day.

Battery maker LG Energy Solution soared 4 percent and its smaller rival Samsung SDI added 2.2 percent, reflecting Tesla’s 4.9 percent jump overnight.

Australian markets finished marginally lower after the Reserve Bank of Australia (RBA) held the cash rate steady as expected but maintained a firm stance on inflation – reducing the likelihood of a December rate cut.

The benchmark S&P/ASX 200 Index edged down 0.1 percent to 8,142 as financials declined, offsetting gains in the mining and energy sectors.

The broader All Ordinaries index ended flat with a positive bias at 8,385.10. Banks Westpac and Commonwealth Bank of Australia fell over 3 percent each while mining giant BHP rallied 3.3 percent and Rio Tinto surged 3.7 percent.

Casino firm Aristocrat Leisure climbed 2.1 percent after winning an injunction against a competing game in the U.S.

Supermarket chain Coles Group lost 3 percent and Woolworths fell 2.9 percent after they were sued over fake discount claims.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index fell 0.8 percent to 12,303.99.

Europe

European stocks have moved higher on Tuesday after China unleashed a swath of stimulus measures including cuts to its benchmark interest rate to put the economy out of its deflationary funk and back towards the government’s growth target.

Markets gave up some early gains after a survey showed German business morale fell for a fourth straight month in September, adding to concerns the euro zone’s biggest economy may have tipped into recession.

While the French CAC 40 Index has jumped by 1.2 percent, the German DAX Index is up by 0.5 percent and the U.K.’s FTSE 100 Index is up by 0.2 percent.

The British pound gained further against its peers after Bank of England (BoE) Governor Andrew Bailey said he doesn’t expect a return to low rates.

Bailey said he was “very encouraged” by the downwards path of inflation and therefore expects interest rates will fall gradually.

In corporate news, Dulux paint maker AkzoNobel has moved to the upside after it announced plans to cut 2,000 jobs globally.

Miners Anglo American, Antofagasta and Glencore have also surged as copper prices hit a two-month high supported by China’s measures.

China-linked luxury companies such as LVMH, Kering and Hermes International have also moved sharply higher in Paris.

Johnson Matthey has also jumped. The chemicals and sustainable technologies company said the second tranche of share buyback, announced in July, of up to 125 million pounds will commence today.

TotalEnergies has also advanced. The integrated energy company said it has signed a Heads of Agreement (HoA) with South Korea’s HD Hyundai Chemical to supply 200,000 tons of LNG per year for 7 years starting from 2027.

Nordex SE has also risen. The German wind turbine maker announced that it has been tapped to supply and install 41 turbines for a 147.6-MW wind project in Poland.

On the other hand, engineering firm Smiths Group has moved sharply lower after its FY24 results missed estimates.

U.S. Economic News

Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of July at 9 am ET.

Also at 9 am ET, Federal Reserve Board Governor Michelle Bowman is due to speak on the economic outlook and monetary policy before the Kentucky Bankers Association Annual Convention.

The Conference Board is scheduled to release its report on consumer confidence in the month of September at 10 am ET. The consumer confidence index is expected to edge down to 103.0 in September after rising to 103.3 in August.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $69 billion worth of two-year notes.