(Bloomberg) — European stocks and US equity-index futures rose as investors grew confident the Federal Reserve’s peak interest rate would be within levels already priced in by markets.
Most Read from Bloomberg
Contracts on the S&P 500 and Nasdaq 100 climbed at least 0.6% each after the underlying indexes avoided a selloff following the Fed’s minutes and remarks by officials. The dollar fell for the first time in three days. Oil futures steadied. Europe’s equity benchmark rebounded from a two-day loss as Nvidia Corp.’s bullish outlook sparked gains in global technology shares. Japan was closed for a holiday.
After months of divergence over the perceived path of monetary tightening, the Fed and markets are increasingly getting aligned in their expectations, reducing the scope for hawkish shocks. While the minutes and comments by Fed officials including James Bullard reiterated a continuing preference for rate hikes, they didn’t say anything that wasn’t factored in by the market’s aggressive repricing of Fed bets in recent weeks.
“One of our big concerns coming into this year was the market was anticipating an event that wasn’t likely to occur, that being a dovish Fed pivot,” Danielle Poli, co-portfolio manager of the diversified income fund for Oaktree Capital Management, said in an interview with Bloomberg Television. “The market has woken back up a little bit in these last two weeks.”
The dollar weakened against nine of its Group-of-10 peers. The Australian dollar showed the biggest gains on stronger-than-expected business investment data and dip-buying by exporters.
Traders are now pricing in a Fed peak rate of 5.55% by July, compared with 4.90% they were betting on at the start of year. However, Fed officials haven’t grown more aggressive during this time: Fed Bank of St. Louis President Bullard reiterated his earlier stance, saying “I’m still at 5.375%.” Markets fully price in a 25 basis-point hike in March, but assign a 24% probability for a 50-point hike.
US Jobless claims data due Thursday may help shine a light on the strength of the labor market, which has remained stubbornly robust through the rate-hiking cycle. Eurozone inflation data due today will also help investors outline the health of the European economy.
In stocks, South Korea’s benchmark rose the most in a week and the won advanced after the central bank kept its benchmark interest rate unchanged with its first pause in rate increases in a year.
In Europe, technology and industrial-goods shares accounted for two-thirds of the Stoxx 600’s gains. Rolls-Royce Holdings Plc shares soared as much as 20% after the company’s full-year earnings.
Oil edged higher — after the longest run of losses this year — as traders took stock of a mixed demand outlook of tightening US monetary policy and China’s reopening.
Key events this week:
-
Eurozone CPI, Thursday
-
US GDP, initial jobless claims, Thursday
-
Atlanta Fed President Raphael Bostic speaks, Thursday
-
BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday
-
US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday
-
Russia’s invasion of Ukraine hits the one-year mark, Friday
Some of the main moves in markets:
Stocks
-
The Stoxx Europe 600 rose 0.3% as of 8:32 a.m. London time
-
S&P 500 futures rose 0.6%
-
Nasdaq 100 futures rose 1%
-
Futures on the Dow Jones Industrial Average rose 0.4%
-
The MSCI Asia Pacific Index rose 0.2%
-
The MSCI Emerging Markets Index rose 0.6%
Currencies
-
The Bloomberg Dollar Spot Index fell 0.2%
-
The euro was little changed at $1.0613
-
The Japanese yen was little changed at 134.81 per dollar
-
The offshore yuan was little changed at 6.8977 per dollar
-
The British pound was little changed at $1.2055
Cryptocurrencies
-
Bitcoin rose 2.8% to $24,476
-
Ether rose 3.3% to $1,673.04
Bonds
-
The yield on 10-year Treasuries was little changed at 3.92%
-
Germany’s 10-year yield was little changed at 2.51%
-
Britain’s 10-year yield was little changed at 3.61%
Commodities
-
Brent crude rose 0.7% to $81.14 a barrel
-
Spot gold rose 0.2% to $1,828.73 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Akshay Chinchalkar, Richard Henderson, Alice Gledhill and James Hirai.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
