Easing Evergrande Concerns May Lead To Continued Strength On Wall Street

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

Stocks may continue to regain ground following the slump seen earlier this month, which dragged the Dow to its lowest closing level in three months on Tuesday.

The upward momentum on Wall Street also comes amid easing concerns about Evergrande after the Chinese property developer reached a settlement with mainland bondholders.

The People’s Bank of China’s infusion of massive capital into the country’s banking system has also eased concerns about a potential default by Evegrande.

The U.S. stock futures remained firmly positive following the release of a report from the Labor Department showing first-time claims for U.S. unemployment benefits unexpectedly increased for the second straight week in the week ended September 18th.

Following the Federal Reserve’s highly anticipated monetary policy announcement, stocks closed sharply higher during trading on Wednesday. The major averages remained firmly positive on the heels of the Fed announcement after showing a strong move to the upside in morning trading.

The major averages all posted strong gains on the day. The Dow jumped 338.48 points or 1 percent at 34,258.32, the Nasdaq surged up 150.45 points or 1 percent to 14,896.85 and the S&P 500 shot up 41.45 points or 1 percent to 4,395.64.

The early rally on Wall Street came as traders picked up stocks at reduced levels following the slump seen during the month of September.

With the upward move on the day, the Dow bounced off its lowest closing level in three months, while the S&P 500 rebounded from a two-month closing low.

Stocks held on to strong gains even as the Fed hinted tapering of its asset purchases could begin in the near future amid continued progress towards it goals of maximum employment and price stability.

The Fed said in the announcement of its latest monetary policy decision that a “moderation in the pace of asset purchases may soon be warranted” if progress towards its dual goals continues broadly as expected.

During his post-meeting press conference, Fed Chair Jerome Powell indicated the central bank could begin tapering its asset purchases as soon as its next meeting in early November.

“While no decisions were made, participants generally viewed that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” Powell said.

Powell said substantial further progress has been achieved with regard to the Fed’s inflation goal, while “the test for substantial further progress on employment is all but met.”

The comments about tapering asset purchases came as the Fed announced its widely expected decision to keep the target range for the federal funds rate at 0 to 0.25 percent.

The Fed also reiterated that it expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with maximum employment and inflation is on track to moderately exceed 2 percent for some time.

However, the latest projections from the Fed officials now predict interest rates will be raised next year compared to previous forecasts calling for the first rate hike in 2023.

Fed officials also downwardly revised forecasts for U.S. GDP growth in 2021 to 5.9 percent from 7.0 percent, while forecasts for GDP growth in 2022 were upwardly revised to 3.8 percent from 3.3 percent.

Airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 3.1 percent to its best closing level in over a month.

Substantial strength was also visible among oil stocks, as reflected by the 3 percent spike by the NYSE Arca Oil Index.

The strength among oil stocks came as the price of crude oil jumped following the release of a report showing another weekly drop in U.S. crude oil inventories.

Financial stocks also turned in a strong performance on the day, driving the NYSE Arca Broker/Dealer Index and the KBW Bank Index up by 2.2 percent and 2 percent, respectively.

Natural gas, steel and semiconductor stocks also saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.30 to $71.93 a barrel after jumping $1.74 to $72.23 a barrel on Wednesday. Meanwhile, after inching up $0.60 to $1,778.80 an ounce in the previous session, gold futures are falling $8.30 to $1,770.50 an ounce.

On the currency front, the U.S. dollar is trading at 109.94 yen versus the 109.78 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1732 compared to yesterday’s $1.1687.

Asia

Asian stocks rallied on Thursday as investors digested the Fed’s plans to taper its stimulus program and fears of a corporate collapse in China receded after China Evergrande reached a settlement with mainland bondholders.

Despite anxiety over whether the company would default on its coupon dues on a dollar bond on Thursday, most markets in the region moved in positive territory. Japanese markets were closed for a local holiday.

China’s Shanghai Composite Index gained 0.4 percent in the day’s trade to close at 3,642.22 after embattled property giant China Evergrande said that its top priority was to help wealth investors redeem their products. The PBoC meanwhile infused liquidity worth 110 billion yuan that supported trading sentiment.

Power generation business GD Power Development Company topped the price charts with a 10.1 percent gain.

Hong Kong’s Hang Seng Index jumped 289.44 points or 1.2 percent to 24,510.98. China based property business Country Garden Services Holdings surged 12.7 percent. Construction and property services business Longfor Group Holdings gained 9.7 percent. Country Garden Holdings, a company engaged in the sale of properties, also moved up more than 7 percent.

China Evergrande group surged 17.6 percent as it reached a settlement with mainland bond investors.

Meanwhile, the Korean Stock Exchange’s Kospi Index lost 12.93 points or 0.4 percent to close at 3,127.58. The day’s trading range was between 3,107.98 and 3,131.63.

Pharmaceutical company PharmGen Science was the lead gainer with a 30 percent surge, closely followed by marine transportation business Heung-A Shipping, which spike 29 percent.

Apparel and uniform manufacturer Hyungji Elite declined more than 25 percent.

Australia’s S&P/ASX200 Index closed trading at 7,370.20 after gaining 73.30 points or 1 percent. The index is currently 3.4 percent below its 52-week high of 7632.80.

Media and information services business News Corporation, which also trades on the Nasdaq, gained 8.4 percent following a stock buyback announcement. Whitehaven Coal surged 7.2 percent as coal prices jumped to record highs. Corporate Travel Management Ltd. advanced 6.6 percent.

Reliance Worldwide Corporation declined the most with a 2.4 percent slide. Toll road operator Transurban Group shed 1.3 percent as it progressed with its equity raising plans.

Gold miners Ramelius Resources, Northern Star Resources, and St Barbara Ltd. were notably lower as gold prices eased following the Fed’s taper announcement.

Meanwhile, the IHS Markit Australia flash PMI releases for September indicated that the Manufacturing PMI rose to 57.3 from 52 in the prior month, the Services PMI increased to 44.9 from 42.9 in August and the Composite PMI climbed to 46 from 43.3 in August.

Europe

European stocks are firmly in positive territory on Thursday, extending recent gains amid continued optimism about growth and easing concerns about Evergrande’s debt after the Chinese central bank’s infusion of massive capital into the country’s banking system.

The markets are digesting the monetary policy announcements from the Bank of England and the Swiss National Bank and a slew of other economic data from the region.

Markets have also taken note of the Federal Reserve’s statement, which did not give a specific timeline for tapering its monetary stimulus. Also, the Federal Open Market Committee voted unanimously to keep short-term rates anchored near zero on Wednesday and was still split on the timing of the first interest rate hike.

The Bank of England maintained its key interest rate at a record low and quantitative easing, as widely expected, on Thursday.

The Monetary Policy Committee unanimously decided to leave the key interest rate unchanged at 0.1 percent. The MPC also retained the existing stock of corporate bond purchases at GBP 20 billion and the government bond purchases target at GBP 875 billion, taking the size of total quantitative easing to GBP 895 billion.

The Swiss National Bank left its expansionary monetary policy unchanged on Thursday in order to ensure price stability and underpin the economic recovery from the coronavirus-driven downturn.

Policymakers of the central bank decided to retain the policy rate and interest on sight deposits at the SNB at -0.75 percent.

The bank reiterated that it is willing to intervene in the foreign exchange market as necessary in order to counter upward pressure on the Swiss franc. The bank repeated that the Swiss franc remains highly valued.

The German DAX Index and the French CAC 40 Index are both up by 0.8 percent, although the U.K.’s FTSE 100 Index has bucked the uptrend and edged down by 0.1 percent.

In the U.K. market, Rolls-Royce Holdings, Halma, Antofagasta, Scottish Mortgage, 3I Group, Ferguson and JD Sports Fashion are posting notable gains.

Entain has pulled back sharply on profit taking after recent hefty gains. Hargreaves Lansdown, IAG and Prudential are also notably lower.

In the French market, Faurecia and Valeo are posting strong gains. Veolia, Renault, Accor, Hermes International, Kering, Carrefour and Air France-KLM have also moved the upside.

In Germany, Continental, Sartorius, Infineon Technologies, Volkswagen, Daimler, Adidas, Porsche Automobile, Zalando and RWE are up sharply.

In economic news, the IHS Markit Germany flash PMI releases for September indicated that the Manufacturing PMI fell to 58.5 from 62.6 in the prior month, the Services PMI decreased to 56 from 60.8 in August and the Composite PMI dropped to 55.3 from 60.0 in August.

Eurozone’s IHS Markit flash PMI releases for September also indicated a similar trend, as the Manufacturing PMI slipped to 58.7 from 61.4 in the prior month, the Services PMI decreased to 56.3 from 59 in August and the Composite PMI dropped to 56.1 from 59.0 in August.

France’s private sector logged the slowest growth since April, as the rates of expansion lost steam in manufacturing and services sectors in September, flash survey data from IHS Markit showed. The flash composite output index dropped to a five-month low of 55.1 in September from 56.9 in August. The reading was also below economists’ forecast of 55.8.

Survey results from statistical office Insee showed France’s business confidence index fell to 106 in September from 110 in August. The index was forecast to fall marginally to 109.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits unexpectedly increased for the second straight week in the week ended September 18th.

The Labor Department said initial jobless claims rose to 351,000, an increase of 16,000 from the previous week’s revised level of 335,000.

With the uptick, jobless claims climbed further off the pandemic-era low of 312,000 set in the week ended September 4th.

The continued rebound surprised economists, who had expected jobless claims to dip to 320,000 from the 332,000 originally reported for the previous month.

At 10 am ET, the Conference Board is scheduled to release its report on leading economic indicators in the month of August. The leading economic index is expected to climb by 0.6 percent.

The Treasury Department is due to announce the details of this month’s auctions of two-year, five-year and seven-year notes at 11 am ET.

Stocks In Focus

Shares of BlackBerry (BB) are moving sharply higher in pre-market trading after the software company reported a narrower than expected fiscal second quarter loss on revenues that exceeded analyst estimates.

Restaurant operator Darden Restaurants (DRI) is also likely to see initial strength after reporting fiscal first quarter results that beat expectations on both the top and bottom lines and announced plans to repurchase an additional $750 million of its outstanding common stock.

Shares of Salesforce (CRM) may also move to the upside after the customer relationship management software company raised its full-year revenue guidance.

On the other hand, shares of Steelcase (SCS) may come under pressure after the office furniture maker reported fiscal second quarter earnings that missed analyst estimates.

Drugstore chain Rite Aid (RAD) is also seeing pre-market weakness after reporting a narrower than expected fiscal second quarter loss but on revenues that missed expectations.