U.S. stock futures rose on Wednesday as traders began the new month on a more optimistic note following signs of a recovery in the Chinese economy.
How are stock-index futures trading
- S&P 500 futures ES00, +0.22% rose 9 points, or 0.2%, to 3985
- Dow Jones Industrial Average futures YM00, +0.14% gained 54 points, or 0.2%, to 32736
- Nasdaq 100 futures NQ00, +0.33% advanced 42 points, or 0.3%, to 12114
On Tuesday, the Dow Jones Industrial Average DJIA, -0.71% fell 232 points, or 0.71%, to 32657, the S&P 500 SPX, -0.30% declined 12 points, or 0.3%, to 3970, and the Nasdaq Composite COMP, -0.10% dropped 11 points, or 0.1%, to 11456. The Dow Jones Industrial Average fell 4.2% in February and is now down 1.5% for 2023.
What’s driving markets
A fresh month and news that China’s factory activity expanded at its fastest pace in more than a decade were boosting risk appetite.
Hong Kong’s Hang Seng index HSI, +4.21% jumped 4.2% after the manufacturing purchasing manager’s index for the world’s second biggest economy showed a reading of 52.6 in February, up from 50.1 the month before.
The ending of Hong Kong’s mask mandate also lifted sentiment as it illustrated China’s continuing emergence from its COVID lockdown.
London-listed mining stocks were stronger on hopes of more raw material demand from China.
The positivity fed into U.S. index futures, which were bouncing back after a tough February, when worries that stubborn inflation would encourage central banks to keep raising interest rates pushed the S&P 500 down 2.6% and forced 2-year Treasury yields to their highest since 2008.
“’March winds of hope are blowing through markets that China’s reopening will offset weakness in other countries which are beset with stubborn inflation and a worsening cost of living crisis,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“The COVID crisis is receding rapidly in the rear-view mirror and demand for raw materials to keep factory lines rolling is expected to be brisk. Brent Crude has ticked up on the news heading towards $ 84 a barrel, amid expectations that industry hunger for energy in China will mount,” Streeter added.
However, the sight of firmer energy prices is likely to remind investors that improving economic activity in China may add to inflationary pressures, thereby containing gains for stocks as the market remains wary of tighter monetary policy.
“Rate hike uncertainty continues to plague the broader market as the Fed rules with an iron fist,” said Stephen Innes, managing partner at SPI Asset Management.
U.S. economic updates set for release on Wednesday include the final reading of the S&P Global manufacturing PMI for February at 9:45 a.m. Eastern, followed at 10 a.m. by the February ISM manufacturing report and the January construction spending data.
Minneapolis Fed President Neel Kashkari is due to speak at 9 a.m.