Stocks Climb Amid Optimism Over Inflation, China: Markets Wrap

(Bloomberg) — European stocks advanced and Wall Street equity futures edged higher as traders bet that US consumer price data on Thursday will show further softening.

Most Read from Bloomberg

Mining and real estate stocks led gains because the Stoxx Europe 600 Index climbed 0.5%. Amongst individual moves, Direct Line Insurance Group Plc plunged by a record after saying it not expects to pay a final dividend. S&P 500 contracts were more modestly higher after the underlying index moved back above its key 3,900 mark in Latest York on Tuesday. A gauge of Asian equities rose, with sentiment within the region supported by China’s reopening from Covid curbs.

Treasury yields trimmed their advance from the previous session, with the speed on 10-year debt slipping to just under 3.6% as investors remained focused on the value outlook for the US. A gauge of dollar strength held close by of a seven-month low.

Federal Reserve Chair Jerome Powell in remarks Tuesday shunned commenting on the outlook for monetary policy as traders await the inflation numbers for any signs of cooling. Such a scenario could help construct the case to slow the pace of rate hikes, at the same time as some officials say it’s too early to declare victory over inflation.

“The prospect of a less cloudy economic outlook in each Europe and the US after recession risks in each regions eased back, combined with the reopening of the Chinese economy, is providing strong support toward risk appetite from investors,” said Pierre Veyret, a technical analyst at ActivTrades. “The shortage of clear hints from Fed Chairman Jerome Powell yesterday also contributed to keeping the bullish trading stance alive, and most traders will now look toward tomorrow’s US inflation print for further clues.”

While Powell didn’t directly comment on the Fed’s next steps at a forum in Stockholm, he did say that “restoring price stability when inflation is high can require measures that are usually not popular within the short term as we raise rates to slow the economy.”

Fed Governor Michelle Bowman said the central bank has more work to do to curb inflation, noting that further tightening is required.

“We do expect an inflection in central bank policy in a while this yr,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “More risk-tolerant investors can look to anticipate this turn by phasing into markets, in search of early winners from a world improvement in sentiment, and identifying beneficiaries from China’s reopening.

“Nevertheless, we don’t imagine now we have yet reached the inflection point in policy or economic growth, and as we enter 2023 we proceed to favor a defensive tilt when adding exposure in each equity and fixed-income markets,” he said.

Meanwhile in Asian markets, much focus is on China and its reopening from Covid restrictions. The MSCI Asia Pacific Index added to Monday’s move, when it entered a bull market amid hopes for economic growth and weakness within the dollar.

Optimism over demand from China was also evident within the iron ore market, with the steel-making ingredient rallying above $120 a ton in Singapore. Copper rose above $9,000 a ton for the primary time since June, fueled by optimism that China’s reopening will spur demand on the earth’s top consumer.

Elsewhere in markets, oil rebounded after falling as an industry report showed a big construct in US crude stockpiles amid a downbeat outlook for monetary policy.

Key events this week:

  • ECB Governing Council members speak at Euromoney conference in Vienna, Wednesday

  • US CPI, initial jobless claims, Thursday

  • St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday

  • Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday

  • China trade, Friday

  • US University of Michigan consumer sentiment, Friday

  • Citigroup, JPMorgan, Wells Fargo report earnings, Friday

This week’s MLIVE Pulse Survey:

Among the most important moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.5% as of 9:23 a.m. London time

  • S&P 500 futures rose 0.2%

  • Nasdaq 100 futures rose 0.2%

  • Futures on the Dow Jones Industrial Average rose 0.2%

  • The MSCI Asia Pacific Index rose 0.5%

  • The MSCI Emerging Markets Index rose 0.2%

Currencies

  • The Bloomberg Dollar Spot Index was little modified

  • The euro rose 0.1% to $1.0746

  • The Japanese yen fell 0.2% to 132.54 per dollar

  • The offshore yuan was little modified at 6.7795 per dollar

  • The British pound was little modified at $1.2151

Cryptocurrencies

  • Bitcoin was little modified at $17,467.72

  • Ether fell 0.2% to $1,336.55

Bonds

  • The yield on 10-year Treasuries declined six basis points to three.56%

  • Germany’s 10-year yield declined six basis points to 2.25%

  • Britain’s 10-year yield declined 10 basis points to three.45%

Commodities

  • Brent crude rose 0.5% to $80.47 a barrel

  • Spot gold rose 0.5% to $1,885.48 an oz

This story was produced with the help of Bloomberg Automation.

–With assistance from Sofia Horta e Costa, Michael Msika and Brett Miller.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.

Leave a Comment

Copyright © 2024. All Rights Reserved. Finapress | Flytonic Theme by Flytonic.