US Futures Signal Recovery After Sober Fed Speak: Markets Wrap

(Bloomberg) — U.S. stock futures pointed to a recovery on Wall Street Thursday, with European stocks rising in sympathy as investors weighed in on mixed economic signals about the health of the U.S. economy and interest rates.

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Contracts on the tech-heavy Nasdaq 100 rose 0.4% after the underlying gauge fell 1.5% on Wednesday. Those on the S&P 500 added 0.3%, while the European equity benchmark also ticked higher.

10-year Treasury yields rose slightly higher after falling on Wednesday amid signals from Federal Reserve officials that policy tightening would continue. A closely monitored portion of the US yield curve remained near levels not seen in four decades — a sign of investor concern for the world’s largest economy.

In a scenario that has played out repeatedly in global markets in recent weeks, stocks had to pause their multi-day rally on Wednesday as stronger-than-expected US economic data and a large number of Fed speakers dampened US central bank hopes. bank could end its rate hike cycle earlier than expected.

“We are aware that every time global markets try to rally on speculation that the end of the Fed’s tightening intentions is in sight, FOMC officials are coming out with a new paragraph of aggressive narratives, to prospect of irrational exuberance.” Simon Ballard, chief economist at First Abu Dhabi Bank, wrote in a note to investors.

With inflation only beginning to ease after hitting multi-decade highs, and a measure of US retail sales rising at its fastest pace in eight months, the message from Fed speakers is that they need to move on to to extinguish price pressure.

Other San Francisco Fed president Mary Daly said a pause in rate hikes was “off the table,” and New York Fed president John Williams said the central bank should avoid factoring financial stability risks into its policy. considerations.

Goldman Sachs Group Inc. raised its expectation for peak interest rates in the US to 5.25% at the high end of the range, up from the previous call of 5%.

Still other signs point to the world’s largest economy losing momentum as US consumers are squeezed by the highest inflation rate in four decades. Retailer Target Corp. fell short of forecasts on Wednesday, saying a slump in US shoppers had weighed on earnings.

“The overall macroeconomic outlook for the US economy is one of fragile strength and this scenario continues to favor a modest easing – and then a plateau – of the pace of incremental tightening,” Ballard wrote.

Oil delivered further losses as investors shifted their focus back to concerns about demand prospects after geopolitical tensions eased.

Gold fell in Asia as expectations of an aggressive Fed outweighed hopes of impending rate hike moderation.

In Britain, Chancellor Jeremy Hunt is expected to talk at length about austerity and tax increases to close the gap in public finances, but he will have to proceed with caution as a new round of austerity has hit the economy, which has suffered the worst. costs may further affect. live tight in four decades.

Read more: Watch UK domestic stocks as Chancellor Hunt budgets

The pound rose, poised to break above $1.20 after falling towards parity in September. While the consensus is that Hunt is sticking to fiscal orthodoxy, traders fear being caught off guard again.

Main events this week:

  • Eurozone CPI, Thursday

  • US housing starts, first jobless claims, Thursday

  • Fed’s Neel Kashkari, Loretta Mester speak, Thursday

  • US Conference Board Leading Index, Existing Home Sales, Friday

Some of the major movements in markets:

Shares

  • The Stoxx Europe 600 was up 0.2% from 8:41am London time

  • Futures on the S&P 500 rose 0.3%

  • Futures on the Nasdaq 100 rose 0.4%

  • Futures on the Dow Jones Industrial Average rose 0.3%

  • The MSCI Asia Pacific Index fell 0.5%

  • The MSCI Emerging Markets Index fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index had changed little

  • The euro was little changed at $1.0398

  • The Japanese yen rose 0.2% to 139.24 per dollar

  • The offshore yuan fell 0.3% to 7.1296 per dollar

  • The British pound rose 0.2% to $1.1937

Cryptocurrencies

  • Bitcoin rose 0.3% to $16,578.2

  • Ether fell 0.3% to USD 1,202.25

Bonds

  • The 10-year Treasury yield rose two basis points to 3.71%

  • German 10-year yields fell by two basis points to 1.98%

  • UK 10-year yields fell by two basis points to 3.12%

Raw materials

  • Brent crude had changed little

  • Spot gold fell 0.3% to $1,769.34 an ounce

This story was created with the help of Bloomberg Automation.

–With help from Richard Henderson.

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