U.S. Futures, Asia Stocks Climb; Dollar Drops: Markets Wrap

(Bloomberg) — Asian stocks rebounded from their biggest decline since March and U.S. futures climbed after the Federal Reserve — again — boosted investor sentiment in face of worries over a second wave of the coronavirus.

S&P 500 futures spiked to sessions highs on news the Trump administration is considering $1 trillion in infrastructure spending to boost an economy suffering from the coronavirus pandemic. Japanese, Australian and Hong Kong shares rose at least 2%. Korean stocks rose more than 4%. The S&P 500 advanced after the index erased losses and closed higher Monday. The dollar extended declines and Treasuries added to Monday’s losses, while crude oil held most of its gains. The Fed detailed plans to buy individual corporate bonds, underscoring its role as a backstop.

The turnaround on Monday followed a wave of risk-off moves earlier in the day, prompted by rising numbers of coronavirus cases in locations ranging from Beijing and Tokyo to Florida. After global equities saw blow-out gains in April and May, investors are debating whether valuations gibe with the continuing Covid-19 threat and still-moribund economic activity.

The Fed’s purchases of corporate bonds will be made by the Fed’s Secondary Market Corporate Credit Facility, an emergency lending program that to date has purchased only exchange-traded funds. The central bank said it would follow a diversified market index of U.S. corporate bonds created expressly for the facility.

“The size and the pace of Fed balance sheet expansion is something that will put a floor under global equity markets,” Stephen Gallo, BMO Capital Markets head of European FX strategy, said on Bloomberg TV.

Helping sentiment, the Trump administration is preparing a nearly $1 trillion infrastructure proposal as part of its push to spur the world’s largest economy back to life, according to people familiar with the plan.

Meanwhile, theBank of Japan, as expected, maintained its key policy rate while expanding its special lending program to 110 trillion yen ($1 trillion) from 75 trillion yen, underpinning gains in Japanese equities.

Elsewhere, oil was back around $37 a barrel amid signs of improving demand and declining production.

These are some key events coming up:

Policy decisions from the Bank of England and the Swiss National Bank are due this week.Cboe plans to open its trading floor, which has been electronic only since March 16.Federal Reserve Chairman Jerome Powell delivers his semi-annual policy report to Congress.

These are some of the main moves in financial markets:

Stocks

S&P 500 futures rose 1.4% as of 11:45 a.m. in Tokyo. The S&P 500 Index rose 0.8% in New York.Japan’s Topix Index jumped 2.8%.Kospi Index rose 4.4%.Australia’s S&P/ASX 200 Index rose 3.7%.Hong Kong’s Hang Seng Index gained 2.7%.Shanghai Composite Index gained 1.1%.Euro Stoxx 50 futures jumped 3%.

Currencies

The Japanese yen was little changed at 107.42 per dollar.The offshore yuan was at 7.0634 per dollar, up 0.1%.The euro traded up 0.2% to $1.1340.The Bloomberg Dollar Spot Index fell 0.4%.

Bonds

The yield on 10-year Treasuries climbed about three basis points to 0.75%.Australia’s 10-year bond yield rose about six basis points to 0.92%.

Commodities

West Texas Intermediate crude dipped 0.2% to $37.05 a barrel after climbing 2.4% Monday.Gold rose 0.4% to $1,731.88 an ounce.

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