Stocks Rise Along with Yields as Fed Messages Digest: Markets End

Stocks Rise Along with Yields as Fed Messages Digest: Markets End



Buzz Update Stocks Rise Along with Yields as Fed Messages Digest: Markets End

(Bloomberg) – European stocks rose and U.S. index futures pointed to a stronger open on Wall Street after two days of losses triggered by signals from the Federal Reserve that interest rates would continue to rise for some time yet.

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Europe’s Stoxx index rose 0.8%, led by energy, banking and utilities, although stocks remained on track to snap a four-week bull run. While the US S&P 500 is down 1% so far this week, index futures on the benchmark have gained 0.3%. Nasdaq contracts also rose, while in New York, chip equipment maker Applied Materials rose 4.1% after it posted better-than-expected sales forecasts. A host of tech names, including Nvidia Corp., Meta Platforms Inc. and Amazon.com Inc., also won.

The moves come a day after stocks were lowered sharply by hawkish comments from St. Louis Fed President James Bullard, who said interest rates needed to rise at least 5% to 5, 25% to curb inflation. His comments prompted markets to revise their expectations for a possible US rate hike upwards.

The dollar retreated as Treasury yields extended their run following Bullard’s comments. But Bullard is just the latest policymaker to warn markets that while inflation appears to be easing from decades-long highs, policy needs to be tightened further to tame price pressures.

However, some investors said the hawkish comments did not necessarily mean rates would peak at higher levels than previously thought.

“The Fed wants to make sure that its work doesn’t unravel, that the language is always strong, and that there’s always a coordinated effort by board members to push the hawkish button,” James Athey said. , Chief Investment Officer at Abrn Investment Management Ltd. at Bloomberg Television. . “That doesn’t mean the destination is necessarily a higher rate than the markets thought a week or two ago. I think they’re just trying to play down investor sentiment a bit.



Fears are growing, however, that the relentless rise in rates will hurt economic growth, with a critical segment of the Treasury yield curve at the most steeply inverted in four decades – historically such an inversion has signaled a recession in the largest economy of the world. Growth-sensitive copper and oil prices were poised for weekly losses, pressured by concerns over a deteriorating demand outlook.

Ellen Hazen, chief market strategist at FLPutnam Investment Management, said that if the Fed continues to raise rates at the current pace, “by the time they get the information that they’ve been successful in slowing the economy and slow inflation, it might be too late.”

“It’s just too early to know exactly how this is going to play out on the economy and that’s the biggest risk,” she told Bloomberg Television.

Still, the decline in the dollar allowed other major currencies to strengthen, with the Japanese yen gaining further momentum on data showing inflation at its highest level in 40 years. The pound tried to recoup Thursday’s losses as investors weighed the fallout from the government budget on an economy already in recession.

Earlier, Hong Kong’s benchmark Hang Seng saw a third consecutive week of gains, thanks to measures taken by China to support the real estate sector and ease Covid restrictions. The benchmark’s tech gauge hit a two-month high on Friday, led by Alibaba, which missed second-quarter revenue but increased share buybacks.

Bitcoin was on course for a weekly gain even as the collapse of Sam Bankman-Fried’s FTX empire continues to rock the crypto market.

Key events this week:

Some of the major movements in the markets:

Shares

  • The Stoxx Europe 600 rose 0.8% at 10:08 am London time

  • S&P 500 futures rose 0.3%

  • Nasdaq 100 futures rose 0.4%

  • Dow Jones Industrial Average futures rose 0.2%

  • The MSCI Asia-Pacific index rose 0.3%

  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%
  • The euro was little changed at $1.0372

  • The Japanese yen rose 0.2% to 139.93 per dollar

  • The offshore yuan rose 0.3% to 7.1268 to the dollar

  • The British pound rose 0.5% to hit $1.1922

Cryptocurrencies

  • Bitcoin rose 0.5% to $16,764.29
  • Ether rose 1% to $1,217.45

Obligations

  • The yield on 10-year Treasury bills rose three basis points to 3.80%
  • Germany’s 10-year yield rose five basis points to 2.07%

  • The UK 10-year yield rose six basis points to 3.26%

Goods

  • Brent rose 0.1% to $89.87 a barrel
  • Spot gold rose 0.2% to $1,764.83 an ounce

This story was produced with assistance from Bloomberg Automation.

–With the help of Tassia Sipahutar.

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