US equity futures signaled a firmer open for Wall Street, as a recent rise in global bond yields paused and investors took comfort in signs of underlying strength in the world economy.
(Bloomberg) — US equity futures signaled a firmer open for Wall Street, as a recent rise in global bond yields paused and investors took comfort in signs of underlying strength in the world economy.
Contracts on the S&P 500 index ticked higher after the underlying gauge clawed back a weekly loss Thursday. Futures for the tech-heavy Nasdaq also rose, with Tesla Inc. gaining about 2% in premarket trading as data showed a rise in Tesla’s vehicle shipments from China last month. Investors are now awaiting data on US services. Europe’s Stoxx 600 gauge climbed 0.7%, heading for a weekly gain.
Treasuries advanced across the curve, with the 10-year benchmark yield slipping six basis points to 3.99% after rising for three consecutive days. German 10-year yields snapped a five-day rising streak to drop three basis points. The dollar too retreated against a basket of currencies and was on track for a weekly drop following four weeks of gains.
Data earlier this week showed continued labor-market resilience in the world’s largest economy, supporting the case for the Federal Reserve to keep tightening policy, a theme that pushed almost every major asset into the red in February. However, stocks have managed to hold their own so far in March, despite a series of hot inflation readings and strong labor-market prints that caused investors to ramp up bets on where interest rates might peak.
Risk sentiment also received a boost on Friday from forecast-beating factory data from China.
“Short-term, equity markets seem to be more focused on a soft landing (for the economy) than they are on the cost pressures,” said Luke Hickmore, investment director at abrdn. While money markets now see US interest rates rising to about 5.5% by September, Hickmore reckons “markets are overpricing Fed and UK central bank policy-rate peaks; I think the policy peak comes earlier.”
Read: Sinking Bond Markets Send a Message to Equities: Taking Stock
Still, the stock rebound so far in March looks tentative, given investors remain cautious about the onslaught of rate increases. Cash funds attracted inflows of $68 billion in the week through March 1, showing many investors continue to seek out safe assets.
Equities also must contend with Treasury yields that now offer returns of more than 4%, with the 30-year yield rising above that mark for the first time since November before hovering around 3.92%.
Fed officials also continued to deliver hawkish signals, with Federal Reserve Governor Christopher Waller saying on Thursday that he’d favor raising interest rates even more than his current outlook if economic indicators continue to come in hotter than expected.
“There is a cohort of investors who think the Fed may have to hike a lot more and that’s why interest rates are rising as much as they have recently,” Priya Misra, global head of rates strategy at TD Securities, said on Bloomberg Television.
Oil headed for its first weekly gain in three weeks as optimism over China’s recovery offset persistent concerns on tighter US monetary policy. Gold climbed and was poised for the best week since mid January.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.4% as of 8:39 a.m. New York time
- Nasdaq 100 futures rose 0.4%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.6%
- The MSCI World index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.0620
- The British pound rose 0.5% to $1.2009
- The Japanese yen rose 0.5% to 136.07 per dollar
Cryptocurrencies
- Bitcoin fell 4.6% to $22,342.56
- Ether fell 4.4% to $1,568.14
Bonds
- The yield on 10-year Treasuries declined six basis points to 3.99%
- Germany’s 10-year yield declined three basis points to 2.72%
- Britain’s 10-year yield declined one basis point to 3.87%
Commodities
- West Texas Intermediate crude fell 0.7% to $77.59 a barrel
- Gold futures rose 0.6% to $1,852.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck, Brett Miller and Tassia Sipahutar.
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