(Bloomberg) — Futures on the US stock index rose as investors grew more confident that peak Federal Reserve interest rates would remain within levels already priced in by markets.
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Contracts on the S&P 500 and Nasdaq 100 each rose at least 0.4% after the underlying indices avoided a sell-off following the Fed’s minutes and officials’ comments. The dollar and government bonds traded lower. The European equity benchmark ended a two-day loss as Nvidia Corp.’s bullish outlook. led to gains in global technology stocks. Japan was closed for a holiday.
After months of disagreement over the perceived path of monetary tightening, the Fed and markets are increasingly aligned with their expectations, narrowing the scope for aggressive shocks. While the minutes and comments from Fed officials, including James Bullard, reiterated a continued preference for rate hikes, they said nothing that was not factored into the market’s aggressive repricing of Fed bets in recent weeks.
“One of our biggest concerns this year was that the market was anticipating an event that probably wasn’t going to happen, which was a loose Fed pivot,” said Danielle Poli, co-portfolio manager of the diversified income fund for Oaktree Capital Management. said in an interview with Bloomberg Television. “The market has woken up a bit in the past two weeks.”
The dollar was seen trading slightly weaker after coming off the day’s lows. The Australian dollar posted one of the largest gains against the greenback, driven by stronger-than-expected corporate investment and dip-buying by exporters.
Treasury yields rose across the curve, with the 10-year yield adding 3 basis points to 3.95%.
Traders are now charging a peak Fed rate of 5.55% in July, compared to 4.90% they bet on at the start of the year. However, Fed officials have not become more aggressive during this period: Fed Bank of St. Louis President Bullard reiterated his earlier stance, saying, “I’m still at 5.375%.” Markets fully discount a 25 basis point increase in March, but assign a 24% probability for a 50 point increase.
US jobless claims data due Thursday may shed light on the strength of the labor market, which has remained stubbornly robust during the cycle of rate hikes. Eurozone inflation data released today will also help investors paint a picture of the health of the European economy.
In equities, South Korea’s benchmark rose the most in a week and the won rose after the central bank kept its benchmark rate unchanged with its first pause in rate hikes in a year.
In Europe, technology and auto stocks outperformed the Stoxx 600, while commodities and healthcare names lagged behind. Shares of Rolls-Royce Holdings Plc rose as much as 23% following the company’s annual results.
In New York premarket trading, NVidia was up 8%. The chipmaker presented optimistic revenue guidance for the current quarter, suggesting that a push toward artificial intelligence processors is helping to offset sluggish demand for personal computer chips.
Oil stabilized – after its longest streak of losses this year – as traders took stock of the mixed demand outlook from a tightening monetary policy in the US and China’s reopening.
Main events this week:
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Eurozone CPI, Thursday
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US GDP, first jobless claims, Thursday
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Atlanta Fed President Raphael Bostic speaks Thursday
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BOJ Governor Kazuo Ueda will appear before Japan’s lower house of parliament on Friday
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US PCE deflator, personal spending, new home sales, University of Michigan consumer confidence, Friday
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Russia’s invasion of Ukraine marks its one-year milestone on Friday
Some of the major movements in markets:
Shares
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S&P 500 futures are up 0.4% as of 5:49 a.m. New York time
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Nasdaq 100 futures up 0.7%
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Futures on the Dow Jones Industrial Average rose 0.2%
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The Stoxx Europe 600 had changed little
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The MSCI World Index changed little
Currencies
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The Bloomberg Dollar Spot Index was 0.1% lower
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The euro was little changed at $1.0599
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The British pound fell 0.1% to $1.2033
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The Japanese yen was little changed at 134.92 per dollar
Cryptocurrencies
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Bitcoin rose 2% to $24,270.63
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Ether rose 2.8% to $1,664.54
Bonds
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The 10-year Treasury yield rose three basis points to 3.95%
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German 10-year yields rose three basis points to 2.55%
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UK 10-year yields rose four basis points to 3.64%
Raw materials
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West Texas Intermediate crude rose 0.8% to $74.54 a barrel
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Gold futures fell 0.4% to $1,833.60 an ounce
This story was created with the help of Bloomberg Automation.
–With assistance from Akshay Chinchalkar, Richard Henderson, Alice Gledhill and James Hirai.
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