Stocks Advance as Concerns Over Rate Hikes Recede: Markets Wrap

(Bloomberg) — US index futures and global stocks rose amid signs inflation expectations are receding and central banks are no longer in a rush to accelerate monetary tightening.

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Contracts on the S&P 500 and Nasdaq 100 indexes added at least 0.3% each. MSCI Inc.’s benchmark for world equities climbed to the highest level since Feb. 16. European stocks advanced to a one-month high as banks and industrial shares rallied. Crude oil extended gains as an OPEC+ plan for output cuts sparked short covering. Tesla Inc. rose in New York premarket trading after reporting a 19% increase in China deliveries.

Traders are overcoming their initial bearish reaction to the oil cartel’s plan and are now betting that the impact of higher crude prices on economic recovery won’t allow the Federal Reserve to speed up the pace of interest-rate hikes. The Reserve Bank of Australia’s pause in its tightening cycle as well as a decline in European consumers’ inflation expectations has emboldened markets to stick to their forecasts for more than 50 basis points of Fed rate cuts later this year.

“What’s backing up markets has a lot to do with the good news concerning inflation,” said Frederic Rollin, a senior investment adviser at Pictet Asset Management Ltd. in Paris. “This good news means that central banks have more flexibility to make a pause or to soften.”

The benchmark for world stocks advanced for a seventh day, its longest streak since Jan. 16. The Stoxx 600 traded at the highest level since March 9 as the banking subgroup led by BNP Paribas SA contributed 22% of the gauge’s increase. Glencore Plc rose amid a recovery in copper prices. Investec Plc increased 3.6% after Rathbones Group Plc agreed to buy the company’s UK wealth management business at a deal value of £839 million ($1.05 billion).

US equity-index futures erased losses. While the Fed’s monetary path remains a key concern for equity investors, they are turning their attention to upcoming earnings releases. The latest reporting season is yet to pick up steam, though 14 of the 15 companies in the S&P 500 that have announced results so far have beaten estimates. Investors will be watching whether US corporate performance improves after a relatively sluggish prior quarter when only 69% of companies managed to surpass expectations.

Tesla rose 1.6% in early New York trading after reporting increased deliveries in China that pain a more positive picture of the demand for electric vehicles in the world’s second-biggest economy and the strength of its reopening from Covid controls. The higher sales follows Tesla’s price cuts.

Oil built on Monday’s largest gain in a year after OPEC+ delivered an unexpected and substantial production cut in a shift that tightened the global crude market. Short sellers who had expected the group to hold its production levels rushed to cover their positions, pushing both West Texas Intermediate and Brent futures by 0.6% each.

Treasury yields rose across the curve, with the policy-sensitive two-year rate adding 3 basis points. Yields on Australia’s policy-sensitive three-year government bond dropped about eight basis points following the central bank’s decision to pause its almost yearlong tightening cycle amid signs of moderating inflation and uncertainty over the economic outlook.

Monetary-policy authorities around the world are reiterating the need for more rate increases, but are also signaling no incentive for bigger hikes than planned. Australia’s central bank held its interest rate and watered down its hiking bias by peppering its statement with softer language. In Europe, consumer expectations for euro-area inflation fell for a second month, supporting recent remarks by European Central Bank officials that interest-rate hikes may be nearing their end.

In the US, Fed Governor Lisa Cook said Monday a disinflationary process is under way as wage gains are moderating, even though prevailing inflationary pressures will warrant further tightening. The dollar weakened Tuesday, driven by gains in the euro and British pound. The shared currency headed for a two-month high.

“Most people are focussing on the end of the global tightening cycle,” said Erik Nelson, a strategist at Wells Fargo Bank. “Assuming that it comes to fruition, that’s naturally going to be bad for the dollar.”

Key events this week:

  • Eurozone PPI, Tuesday

  • US factory orders, US durable goods, Tuesday

  • Cleveland Fed President Loretta Mester speaks, Tuesday

  • Eurozone S&P Global Eurozone Services PMI, Wednesday

  • US trade, Wednesday

  • UBS annual general meeting, Wednesday

  • US initial jobless claims, Thursday

  • St. Louis Fed President James Bullard speaks, Thursday

  • US unemployment, nonfarm payrolls, Friday

  • Good Friday. US stock markets closed, bond markets close for part of the day

Some of the main moves in markets:


  • S&P 500 futures rose 0.3% as of 6:17 a.m. New York time

  • Nasdaq 100 futures rose 0.5%

  • Futures on the Dow Jones Industrial Average rose 0.1%

  • The Stoxx Europe 600 rose 0.6%

  • The MSCI World index rose 0.1%


  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.3% to $1.0931

  • The British pound rose 0.7% to $1.2504

  • The Japanese yen fell 0.4% to 132.95 per dollar


  • Bitcoin rose 2.6% to $28,311.75

  • Ether rose 3% to $1,834.37


  • The yield on 10-year Treasuries advanced four basis points to 3.45%

  • Germany’s 10-year yield advanced five basis points to 2.31%

  • Britain’s 10-year yield advanced seven basis points to 3.50%


This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Viljoen, Julien Ponthus, James Hirai and Naomi Tajitsu.

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