Stocks rose on the last trading day of the quarter and global bonds rebounded after dovish-leaning comments from Federal Reserve policymakers and signs that European inflation is finally slowing.
(Bloomberg) — Stocks rose on the last trading day of the quarter and global bonds rebounded after dovish-leaning comments from Federal Reserve policymakers and signs that European inflation is finally slowing.
Europe’s Stoxx 600 equity index rose more than 1%, as data showing euro-area inflation at a one-year low bolstered expectations that interest rates in the bloc could stay on hold. Rate-sensitive sectors, such as real estate and luxury led the gains, with the latter also boosted by a bullish strategy note from Bank of America Corp.
US stocks were set for a firmer open, with futures on the Nasdaq 100 and S&P 500 indexes up more than 0.5%. Among individual movers, Nike Inc. rose 8% in premarket trading after posting forecast-beating profits.
The moves signal relief after a quarter that’s put 30-year borrowing costs on track for their steepest increase since 2009. The July-September quarter has been the worst for MSCI’s all-country index since September 2022, as surging oil prices fanned fears over inflation and economic growth.
Wall Street closed higher on Thursday after comments from Fed rate-setters including Richmond Fed chief Thomas Barkin, who said the US would likely skirt a severe downturn. Meanwhile, his Chicago Fed counterpart Austan Goolsbee said policymakers were at risk of overshooting on interest rates.
Adding to positive sentiment, the Wall Street Journal reported China’s Vice Premier He Lifeng and Foreign Minister Wang Yi are discussing possible visits to the US to prepare for a potential summit between Xi Jinping and Joe Biden.
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“We have had a lot of smallish pieces of better news all coming together at the same time,” said Stuart Cole, head macro economist at brokerage Equity Capital.
While the Fed officials’ comments soothed fears of further US rate rises, sentiment received a further boost from Friday’s softer inflation prints, he said. “Taken in conjunction with the softer German numbers yesterday, that has raised hopes that the ECB is done with tightening,” said Cole.
Global bond yields eased after the previous day’s selloff, with 10-year US Treasuries down about 3 basis points and Japanese 10-year yields sliding from decade-highs after an unscheduled bond-buying operation by the central bank. British and euro-area borrowing costs slid more than 5 basis points.
French bonds were among the biggest gainers after data showed price growth unexpectedly slowing, a day after Germany reported inflation at the lowest in two years.
The data “increases our conviction that the ECB hiking cycle is done,” said Samuel Zief, head of global FX strategy at JPMorgan Private Bank.
Investors are now awaiting the core personal consumption expenditures price index, which economists expect will have slowed in August on an annualized basis.
In currency markets, the dollar weakened against Group-of-10 peers. Bloomberg’s index of the greenback has still gained 2.5% this quarter.
Key events this week:
- US consumer spending, wholesale inventories, 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:
- The Stoxx Europe 600 rose 1.1% as of 11:36 a.m. London time
- S&P 500 futures rose 0.5%
- Nasdaq 100 futures rose 0.7%
- Futures on the Dow Jones Industrial Average rose 0.5%
- The MSCI Asia Pacific Index rose 0.6%
- The MSCI Emerging Markets Index rose 1%
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.4% to $1.0612
- The Japanese yen rose 0.1% to 149.11 per dollar
- The offshore yuan was little changed at 7.2894 per dollar
- The British pound rose 0.5% to $1.2263
- Bitcoin fell 0.2% to $27,040.21
- Ether rose 0.9% to $1,672.2
- The yield on 10-year Treasuries declined three basis points to 4.54%
- Germany’s 10-year yield declined eight basis points to 2.85%
- Britain’s 10-year yield declined four basis points to 4.45%
- Brent crude rose 0.8% to $96.15 a barrel
- Spot gold rose 0.4% to $1,873.17 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck, Abhishek Vishnoi and Tassia Sipahutar.
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