European stocks rose and Wall Street equity futures edged higher as traders bet that US consumer price data on Thursday will show further softening, bolstering the case for less-aggressive interest-rate hikes.
(Bloomberg) — European stocks rose and Wall Street equity futures edged higher as traders bet that US consumer price data on Thursday will show further softening, bolstering the case for less-aggressive interest-rate hikes.
Miners were among outperformers in the Stoxx Europe 600 Index, boosted by optimism China’s economic reopening will spur demand for metals. S&P 500 contracts were more modestly higher after the underlying index moved back above its key 3,900 mark. Bath & Beyond Inc. shares surged in US premarket trading, advancing alongside fellow meme stocks, with the troubled home-goods retailer on course for a third day of gains.
Treasury yields trimmed their advance from the previous session, with the rate on 10-year debt slipping to just below 3.6% as investors remained focused on the price outlook for the US. A gauge of dollar strength held within sight of a seven-month low.
Federal Reserve Chair Jerome Powell in remarks Tuesday refrained from commenting on the outlook for monetary policy as traders await the inflation numbers for any signs of cooling. That could support a move toward slower rate increases, even as some officials say it’s too early to declare victory over inflation.
“The prospect of a less cloudy economic outlook in both Europe and the US after recession risks in both 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 lack 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 not popular in 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 needed.
“We do expect an inflection in central bank policy later on this year,” 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, seeking early winners from a global improvement in sentiment, and identifying beneficiaries from China’s reopening.
“However, we don’t believe we have yet reached the inflection point in policy or economic growth, and as we enter 2023 we continue to favor a defensive tilt when adding exposure in both equity and fixed-income markets,” he said.
In Asian trading, positive sentiment over China helped the MSCI Asia Pacific Index add to Monday’s move, when it entered a bull market amid hopes for economic growth and weakness in the dollar.
Optimism over demand from China was also evident in 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 first time since June, fueled by hopes of increased consumption by the world’s top user of the metal.
Elsewhere in markets, oil reversed an earlier decline as traders weighed the outlook for stronger Chinese demand against a reported build in US crude stockpiles.
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:
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.5% as of 10:51 a.m. London time
- S&P 500 futures rose 0.2%
- Nasdaq 100 futures rose 0.1%
- 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 changed
- The euro rose 0.1% to $1.0749
- The Japanese yen fell 0.2% to 132.46 per dollar
- The offshore yuan was little changed at 6.7827 per dollar
- The British pound fell 0.1% to $1.2139
Cryptocurrencies
- Bitcoin fell 0.1% to $17,445.96
- Ether fell 0.2% to $1,336.45
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.58%
- Germany’s 10-year yield declined three basis points to 2.27%
- Britain’s 10-year yield declined seven basis points to 3.49%
Commodities
- Brent crude rose 0.4% to $80.46 a barrel
- Spot gold rose 0.4% to $1,884.39 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sofia Horta e Costa, Michael Msika and Brett Miller.
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