(Bloomberg) – European stocks edged higher as a recovery in China helped offset a growing perception that policymakers are likely to remain hawkish in the coming months.
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The Stoxx Europe 600 Index rose 0.2%, with mining and consumer products leading the gain, while real estate fell. S&P 500 and Nasdaq 100 futures erased previous losses and rallied after data showed China’s economy rebounded as the country lifted Covid-19 restrictions. Asian stock benchmarks posted their biggest gain since mid-January, supported by a 4% gain in Hong Kong’s benchmark index.
German government bonds extend their losses after surging inflation data triggered a reassessment of interest rate expectations, picking up a theme to dominate trading for a month as the Federal Reserve signaled its interest rate hike is higher than market expectations.
Wednesday’s equity rally contrasts with February’s decline, in which investors lost about 2.5% each on Treasuries and the S&P 500 Index due to high-yield revaluations. U.S. stocks triggered a sell-off in nearly every risk asset.
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Bond traders no longer view the possibility of the Fed cutting rates this year as any better, a change from what they had expected just a month ago. Market expectations also see the European Central Bank raise interest rates through February 2024, with the ECB’s 4% closing rate fully priced in.
“For the Fed, they want to make sure they raise rates and do their job,” said Mary Nicola, multi-asset portfolio manager at PineBridge Investments. “They can keep raising rates but they can keep raising rates until it starts to take a hit and we start to see cracks in the labor market and that’s when it becomes a situation. That’s really tough for the Fed.”
This week’s main events:
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Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
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US Construction Spending, ISM Manufacturing, Light Vehicle Sales, Wednesday
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Eurozone CPI, unemployment, Thursday
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US Initial Jobless Claims, Thursday
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Eurozone S&P Global Eurozone Services PMI, PPI, Friday
Some key moves in the market:
share
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S&P 500 futures were up 0.2% at 3:22 a.m. New York time
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Nasdaq 100 futures rose 0.3%
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Dow Jones Industrial Average futures rose 0.2%
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Stoxx Europe 600 up 0.2%
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The MSCI World Index rose 0.4 percent.
currency
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Bloomberg Dollar Spot Index drops 0.4%
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The euro rose 0.6% to $1.0636
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British Pound rose 0.5% to $1.2079
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Japanese yen rose 0.1% to 136.02 to the dollar
electronic money
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Bitcoin up 2.8% to $23,785.73
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Ether rose 3.1% to $1,656.13
bonds
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Yields on 10-year Treasuries rose three basis points to 3.95%
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German 10-year yield rose 6 basis points to 2.71%
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UK 10-year bond yield rose 4 basis points to 3.87%
Goods
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West Texas Intermediate crude rose 0.5% to $77.46 a barrel
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Gold futures rose 0.2 percent to $1,840.80 an ounce
This story was made possible with the help of Bloomberg Automation.
–With support from Brett Miller, Lu Wang and Isabelle Lee.
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