➤ Hong Kong withdraws extradition bill.
➤ U.S. manufacturing enters contraction territory in August.
U.S. stocks gained Sept. 4, tracking gains from Europe and Asia, where Hong Kong stocks jumped after the former British colony withdrew a controversial extradition bill that sparked months of protests.
The S&P 500 and Nasdaq 100 opened 0.75% and 1% higher, respectively, after closing lower yesterday following U.S. manufacturing data indicating contraction for the first time since August 2016.
European equities traded higher around 9:30 a.m. ET, with the FTSE 100 gaining 0.4% and Germany's DAX and France's CAC 40 rising 1.1% each.
In Asia, the Hang Seng Index rallied nearly 4% after Hong Kong officially withdrew the proposed extradition bill. The Shanghai SE Composite rose 0.9% as business activity growth in China reached a four-month high in August as service firms recorded higher new orders, though foreign sales at manufacturers continued to suffer from escalating trade tensions.
Japan's Nikkei 225 ticked up 0.1%.
Despite weak manufacturing data, it seems a hard task for the Fed to cut more than expected, given a fairly resilient consumer sector, according to ING analysts.
Boston Fed President Eric Rosengren said that while risks to the U.S. economy are higher today, they have not dented the outlook enough to require aggressive action from the Fed, in another sign of divisions at the central bank as officials prepare for their September meeting.
The dollar index, which tracks the U.S. currency's performance against a basket of majors, slipped 0.4% around 9:30 a.m. ET.
Sterling appreciated 0.9% to $1.2186 as U.K. lawmakers set up a new vote Sept. 4 that would delay the U.K.'s departure from the EU in the absence of an exit deal. Prime Minister Boris Johnson, whose government lost its working majority in Parliament, responded by saying he will push for a snap election if the vote succeeds.
An election as early as next month could keep things volatile for sterling, but the hope of preventing a no-deal Brexit could eventually help the currency recover part of the recent weakness, wrote Ipek Ozkardeskaya from the London Capital Group.
Elsewhere, the euro gained 0.4% as Banque de France Governor François Villeroy de Galhau said that the European Central Bank should not necessarily utilize all available tools to stimulate economic growth, joining others that have questioned the need to revive the ECB's bond-buying program.
The Australian dollar strengthened 0.4% versus its U.S. counterpart after annual GDP growth hit a 10-year low in the second quarter, reinforcing expectations of further easing from the Reserve Bank of Australia.
In the bond market, yields on 10-year Treasurys added 3 basis points to 1.492%, while those on German Bunds rose 5 basis points.
Yields on Italian bonds were down 2 basis points as Rome looked poised to install a new government after members of the anti-establishment Five Star Movement approved a coalition deal with the Democratic Party.
Brent crude oil advanced 2.2% to $59.55 per barrel on the ICE Futures Exchange, while gold fell 0.2%.
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The day ahead:
10 a.m. ET — Bank of Canada announcement
10 a.m. ET — U.S. Fed's Robert Kaplan speaks
12:30 p.m. ET — U.S. Fed's Michelle Bowman speaks
12:30 p.m. ET — U.S. Fed's James Bullard speaks
1 p.m. ET — U.S. Fed's Neel Kashkari speaks
2 p.m. ET — U.S. Beige Book
3:15 p.m. ET — U.S. Fed's Charles Evans speaks
