Australia

Australian shares are set to edge higher after Wall Street extended its climb on Monday, even as investor grappled with worries about slowing growth in China.

ASX futures were up 22 points or 0.31% at 6996 as of 7:00am on Tuesday, pointing to a gain at the open.

US stocks climbed Monday, extending their recent winning streak, while commodity prices fell on worries about slowing growth in China.

The S&P 500 added 16.99 points, or 0.4%, to 4297.14 after capping a fourth consecutive week of gains on Friday. The Dow Jones Industrial Average added 151.39 points, or 0.4%, to 33912.44 and the Nasdaq Composite advanced 80.87 points, or 0.6%, to 13128.05.

Nine of the S&P 500's 11 sectors rose, with consumer staples and utilities leading the gains. Energy and materials stocks declined with commodity prices.

Stocks have generally rallied since mid-June. Signs that inflation in the U.S. peaked earlier this summer have investors hoping the Federal Reserve will raise rates at a slower pace starting in September. That in turn has dragged yields on government bonds down from their highs of the year and given a boost to the stock market.

Some investors say stocks have fallen far enough this year to become attractive buying opportunities again. The S&P 500 has climbed 17% since June 16 but remains down 9.8% in 2022.

"When the S&P 500 falls, there's a knot in your stomach, but when you're scared -- that's the right time to be buying," said Peter Boockvar, chief investment adviser of Bleakley Financial Group, who is buying quality value stocks.

In commodity markets, iron ore jumped 5.9% to US$104.55, Brent crude oil slipped 4.3% to $US93.94 a barrel, gold edged down 1.3% to US$1,779.55. China consumes more than 15% of the world's oil and over half of refined copper globally, so slowing Chinese growth is expected to weigh on commodity markets in the coming months

In local bond markets, the yield on Australian 2 Year government bonds dropped to 2.81% while the 10 Year fell to 3.36%. Overseas, the yield on 2 Year US Treasury notes 3.18% and the yield on the 10 Year US Treasury notes slipped to 2.79%.

The Australian dollar hit 70.19 US cents down from the previous close of 71.23. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged down to 97.95.

Asia

Chinese shares ended broadly higher after the PBOC unexpectedly cut two key interest rates to provide more support to the cooling economy. Data on China's July economic activity missed consensus forecast amid strains in the property market and Covid-19 clusters in the country, said Jing Liu, HSBC's chief economist of Greater China. However, the good news is that Beijing appears set to continue its policy easing "given the potentially more challenging growth path than expected," the analyst said in a note. Auto stocks were mixed, with BYD Co. advancing 1.1% and SAIC Motor lost 0.3%


Hong Kong's Hang Seng Index lost 0.7% to 20040.86, after the latest Chinese data showed economic activity slowed across the board in July. Among top losers were companies that said they would voluntarily delist from the NYSE, including PetroChina, Sinopec and China Life Insurance, losing between 2.4% and 3.4%. Chip maker SMIC retreated 6.1% after posting a decline in 2Q profit. Hot-pot chain operator Haidilao topped gainers with an 8.0% jump after it said operations have improved markedly since June..

Europe

The pan-European Stoxx Europe 600 is up 1.48 points or 0.34% today to 442.35, the German DAX is up 20.76 points or 0.15% today to 13816.61, and the French CAC 40 added 16.09 points or 0.25% today to 6569.95.

In London, the FTSE 100 rose 0.3% to 7510 points as pharmaceutical stocks rallied after AstraZeneca reported positive trial results of its cancer treatment Enhertu. AstraZeneca gained 2.2% after saying Enhertu significantly delayed metastatic breast cancer progression in a Phase 3 trial.

"The news had a positive read across to the rest of the sector in underlining the potential strides which the major pharmaceutical companies are now making, while an oil price which remains ahead by 25% in the year to date gave some further support to the oil majors," Interactive Investor analyst Richard Hunter wrote.

Phoenix Group fell 0.5% after the life insurer posted lower first-half profits. Mining shares dropped on lower metal prices after weaker-than-expected Chinese economic data.

North America

Major stock indexes opened Monday's session lower after data on factory output, investment, consumer spending and real estate showed China's economy stumbled in July, prompting the central bank to cut interest rates.

The slowdown adds to pressure on the world economy stemming from the war in Ukraine, high energy prices in Europe, financial strains on several emerging-market economies and rising interest rates in the U.S.

Adding to the pressure on oil, Saudi Aramco said it was on track to boost production over the next five years, while traders were waiting for news on talks about reviving the Iran nuclear deal, which could add to global supplies.

In response to the slowdown, the People's Bank of China cut two key interest rates by 0.1 percentage point and pumped the equivalent of $59.3 billion into the financial system to boost lending and economic growth. Investors, however, said that might not be enough to help commodities rally again.

"What people are going to love to see is what -- besides lowering the rates -- are the other things like infrastructure spending," said Jeremy Schwartz, global chief investment officer at WisdomTree Asset Management. The WisdomTree Enhanced Commodity Strategy Fund fell 1.5%.

Chinese 10-year government bond yields fell to their lowest level since the early months of the pandemic in 2020. The Shanghai Composite Index was flat in a mixed session for stock markets in Asia.

"It's a signal at the margins of something we know already really: that zero-Covid policies, in conjunction with the large issues in the property market, are weighing on Chinese growth," said Lyn Graham-Taylor, senior rates strategist at Rabobank. "To the extent that Chinese demand feeds into everyone else it's clearly something that weighs overall on the global economy."

On the economic front, data from the Federal Reserve Bank of New York showed a decline in factory activity in New York state in August.

Later this week, investors will look for clues about the sizes of the Fed's next rate rise when minutes of the central bank's most recent meeting are published Wednesday. That could influence volatility in the markets. Even with the recent gains, investors remain divided on whether this a bear market rally, which is usually considered to be a temporary rebound amid a broader selloff.

"Traders are looking for reasons to not believe in this rally," said Eric Hale, founder of Trader Oasis, a trading platform for retail traders specializing in stocks and options. Mr. Hale said he believes that markets are seeing a real bounce, adding that valuations have fallen far enough. He has bought high-quality large-cap names within the S&P 500 and avoided investing in energy stocks because of the environmental impact of burning fossil fuels.
On the other hand, Mr. Boockvar said he believes the rebound is a bear market rally, pointing to the Fed's aggressive monetary policy, sticky inflation, companies' moderating profit margins and risks of a slowing economy.

Traders in interest-rate futures markets are betting that the Fed will raise its key rate target by half a percentage point in September. Mr. Graham-Taylor, however, said investors are underestimating the central bank's willingness to raise rates even as the economy slows to bring inflation under control. He thinks the Fed is likely to hike by 0.75 percentage point for the third consecutive meeting.

"The two big questions are, 'Will the Fed overtighten and will earnings continue to come in strong?'" Mr. Schwartz said. He forecasts small-caps to start outperforming the S&P 500 over the next two years, citing valuations have fallen far enough to be pricing in a recession. He recommends investors to find more stability in high dividend-paying companies.