European stocks and US equity futures climbed, after a rally on Wall Street Wednesday that pushed the tech-heavy Nasdaq 100 into a bull market amid bets that a peak in interest rates is near and bank turmoil will continue to ease. The dollar declined in the risk-on mood.
(Bloomberg) — European stocks and US equity futures climbed, after a rally on Wall Street Wednesday that pushed the tech-heavy Nasdaq 100 into a bull market amid bets that a peak in interest rates is near and bank turmoil will continue to ease. The dollar declined in the risk-on mood.
Real estate, banking and retail shares led gains in the Stoxx Europe 600 Index, with Hennes & Mauritz AB soaring after the Swedish clothing company’s first-quarter results beat expectations. S&P 500 contracts advanced 0.4%, with those on the Nasdaq 100 up 0.3%. Philip Morris International Inc. rose in US premarket trading after analysts at JPMorgan Chase & Co. upgraded the maker of Malboro cigarettes.
Investor attention turns next to German inflation data due later Thursday for clues on the path of European Central Bank policy. In the US, the focus is on core personal consumption expenditure and jobless data for clues on the Federal Reserve’s next move. Investors now expect US rates to sit around 4.3% by the end of the year, around 70 basis points lower than the current level.
“Market sentiment remains relatively positive, and investor confidence remains high despite the recent turmoil brought by the financial sector, as appetite for risk gets supported by the prospect of dovish pivots from central banks, providing a good excuse to push stock indices higher just before the end of the quarter,” said Pierre Veyret, a technical analyst at ActivTrades.
The current rally is built more on expectations than actions, leaving the market vulnerable should central banks disappoint investors, Veyret added.
Treasury yields were steady, following muted trading on Wednesday when the 10-year benchmark moved by the smallest margin in more than a month. The greenback gave up an earlier advance after strengthening as investors digested the latest remarks by Fed officials.
“The Fed remains in a very difficult position,” wrote Chris Senyek of Wolfe Research in a note. “With banks stabilizing, inflation still way above target, the labor market still historically strong, and the Fed desperately needing to rebuild credibility, our sense is that the FOMC will hike by 25 basis points on May 3.”
In Wednesday’s New York trading, the Nasdaq 100 rose 1.9%, which cemented its 20% rebound from a low in December. The gauge, which includes Apple Inc., Microsoft Corp., and Amazon.com, closed at the highest level since August in a sign investors are preparing for the Fed to end its interest rate hiking cycle and potentially pivot to looser policy later this year.
On the European economic front, Spanish inflation plummeted as energy costs retreated, though persistent underlying price pressures underscored the dilemma for the ECB as it weighs how much to raise interest rates. March’s headline reading came in at 3.1% — down from February’s 6% and much lower than the 3.7% median estimate in a Bloomberg survey of economists.
Core inflation, however — which excludes volatile items like fuel and fresh produce — only dipped a touch, to 7.5%. Policy sensitive German two-year bonds fell as much as 14 basis points, while money markets lowered bets on the peak ECB rate to 3.40% from 3.49% on Wednesday.
In Asia, an index of the region’s stocks posted modest gains. Investors digested a busy day of Chinese earnings that included Agricultural Bank of China Ltd., Industrial & Commercial Bank of China Ltd., Bank of China Ltd., Bank of Communications Co., Air China Ltd., Country Garden Holdings, Citic Securities Co. and Great Wall Motor Co.
“Analysts are revising up their earnings,” said Audrey Goh, senior cross-asset strategist for Standard Chartered Wealth Management, speaking about Chinese equities on Bloomberg Television. “Consumption, fixed asset investments as well as even the distressed property sector are starting to show some signs of life and recovery.”
Elsewhere in markets, oil rebounded amid the cointinued disruption to shipments from Turkey. Gold steadied and Bitcoin rose, trading above $28,000.
Key events this week:
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.9% as of 10:09 a.m. London time
- S&P 500 futures rose 0.4%
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.4%
- The MSCI Asia Pacific Index rose 0.2%
- The MSCI Emerging Markets Index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.3% to $1.0873
- The Japanese yen rose 0.2% to 132.57 per dollar
- The offshore yuan rose 0.2% to 6.8814 per dollar
- The British pound rose 0.4% to $1.2361
Cryptocurrencies
- Bitcoin rose 0.6% to $28,565.13
- Ether fell 0.2% to $1,799.88
Bonds
- The yield on 10-year Treasuries was little changed at 3.57%
- Germany’s 10-year yield declined one basis point to 2.32%
- Britain’s 10-year yield was little changed at 3.48%
Commodities
- Brent crude rose 0.8% to $78.92 a barrel
- Spot gold rose 0.2% to $1,968.25 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Michael Msika.
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