A benchmark of global stocks headed for the biggest weekly gain since November amid easing inflationary pressure in the US and expectations for less-aggressive rate hikes.
(Bloomberg) — A benchmark of global stocks headed for the biggest weekly gain since November amid easing inflationary pressure in the US and expectations for less-aggressive rate hikes.
European stocks edged higher, set for their strongest performance in the first two weeks of January on record. US equity contracts fell slightly as traders await earnings from major banks later.
A gauge of Asian shares climbed, on course for the highest level since June. Hong Kong-listed tech companies closed higher as investors digested a report that China plans to take “golden shares” in the local units of Alibaba Group Holdings Ltd. and Tencent Holdings Ltd. a move that may give the government more control of the strategic sector.
Japan’s 10-year bond yield spiked above the Bank of Japan’s 0.5% ceiling amid speculation the BOJ will review the side effects of its ultra-loose monetary policy. It pared the move after the central bank announced a second round of unscheduled debt purchases. The yen extended gains after its 2.5% rally Thursday.
The Federal Reserve is on track to downshift to smaller interest-rate increases after figures Thursday showed a further cooling in US inflation. Assessments of the state of the American economy will focus on some of the biggest banks later, with JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. headlining a blockbuster day of Wall Street earnings.
“The more favorable inflation print could allow the Fed to hike by 25 basis points next month rather than the more aggressive hikes it has been using up until now,” Mark Haefele, chief investment officer at UBS Global Wealth Management wrote in a note. “But despite this positive outcome, we continue to believe it is too early for an imminent Fed pivot and the conditions are not yet in place for a sustainable equity rally.”
A gauge of dollar strength slipped lower, while Treasury yields were little changed after dropping in the US session. The pound was steady after data showed the UK economy grew unexpectedly in November.
Traders looked past initial disappointment with an in-line US consumer price index to focus on the idea that aggressive monetary policy may be gradually achieving its desired results. The swap market is showing less than 50 basis points of tightening priced in for the next two Fed gatherings: a small chance of no move at all in March.
Some US officials have signaled openness to making a 25 basis-point rate increase right at their next meeting, while also stressing the Fed still has more work to do to tame prices — and not anticipating any rate cuts this year.
Elsewhere in markets, oil headed for a weekly gain and gold was set for a fourth weekly advance after breaching the $1,900-an-ounce mark in the wake of the release of the US inflation data.
Key events this week:
- US University of Michigan consumer sentiment, Friday
- Citigroup, JPMorgan, Wells Fargo report earnings, Friday
This week’s MLIVE Pulse Survey:
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.3% as of 8:21 a.m. London time
- S&P 500 futures fell 0.1%
- Nasdaq 100 futures fell 0.1%
- Futures on the Dow Jones Industrial Average fell 0.1%
- The MSCI Asia Pacific Index rose 1.1%
- The MSCI Emerging Markets Index rose 1.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0845
- The Japanese yen rose 0.7% to 128.32 per dollar
- The offshore yuan was little changed at 6.7238 per dollar
- The British pound was little changed at $1.2216
Cryptocurrencies
- Bitcoin was little changed at $18,831.08
- Ether fell 1.3% to $1,408.5
Bonds
- The yield on 10-year Treasuries was little changed at 3.44%
- Germany’s 10-year yield declined two basis points to 2.13%
- Britain’s 10-year yield declined two basis points to 3.31%
Commodities
- Brent crude was little changed
- Spot gold rose 0.4% to $1,904.16 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck and Farah Elbahrawy.
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