Stocks rose on Wednesday in a hiatus from the selloff triggered by the Federal Reserve’s preference for restrictive monetary settings to tackle inflation.
Technology companies led gains in Europe, while energy shares fell. French inflation eased more than expected from an all-time high, relieving a little pressure on the European Central Bank as calls for more aggressive action grow.
US futures pushed higher after Wall Street shares on Tuesday hit a one-month low. Robust labor demand and consumer confidence data added to the case for sharp interest-rate hikes to tackle inflation. Fed officials reiterated their determination to curb price pressures.
A dollar gauge and Treasury yields dipped. A deepening yield curve inversion points to fears that the Fed will trigger a recession.
Oil rose, but was still headed for a third monthly drop — the longest losing run in more than two years — hampered by the likelihood of slower global growth. European natural gas advanced after a two-day slump, with traders weighing risks to Russian supplies against the continent’s drastic efforts to curb the energy crisis.
Market bets on a shallower trajectory for Fed tightening are receding, raising the prospect of more losses for stocks and bonds in an already difficult year. Investors are scouring incoming data for clues on the policy path, with August US jobs figures on Friday the next key report.
“What’s clear is that predicting this market is not clean cut,” Angeline Newman, a managing director at UBS Global Wealth Management, said on Bloomberg Television. “We are living in a world where conflicting economic signals are making the path of monetary policy very difficult to determine.”
Fed officials again stressed their commitment to defeating inflation while remaining vague on how big their policy move will be next month.
New York Fed Chief John Williams said rates will need to be held in restrictive territory for “some time,” adding that this meant through 2023 — the latest official to push back on financial-market expectations of cuts later next year.
“We’re still going to see some pretty volatile times and maybe some further downside for equities in the short term,” Steve Brice, chief investment officer at Standard Chartered Wealth Management, said on Bloomberg Television.
Investors are also contending with a European energy crisis as well as mounting friction between Beijing and Taipei after Taiwanese soldiers fired shots to ward off civilian drones.
An Asian stock gauge climbed in a mixed day that saw tech shares advance but Japan’s bourses retreat. BYD Co. plunged in Hong Kong after Warren Buffett’s Berkshire Hathaway Inc. trimmed its stake in the electric vehicle maker.
Traders were evaluating the latest Chinese data, which indicated factory activity shrank for a second month. Power shortages, a property sector crisis and Covid outbreaks all took a toll.
Here are some key events to watch this week:
- ECB Governing Council members due to speak at event Tuesday through Sept. 2
- Euro-area CPI, Wednesday
- Russia’s Gazprom set to halt Nord Stream pipeline gas flows for three days of maintenance, Wednesday
- Cleveland Fed President Loretta Mester due to speak, Wednesday
- China Caixin manufacturing PMI, Thursday
- US nonfarm payrolls, Friday
- UK leadership ballot closes Friday. Winner announced Sept. 5
Some of the main moves in markets:
- The Stoxx Europe 600 rose 0.4% as of 8:05 a.m. London time
- Futures on the S&P 500 rose 0.5%
- Futures on the Nasdaq 100 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 0.1%
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro was unchanged at $1.0015
- The Japanese yen rose 0.3% to 138.35 per dollar
- The offshore yuan rose 0.3% to 6.9026 per dollar
- The British pound rose 0.2% to $1.1677
- The yield on 10-year Treasuries declined one basis point to 3.09%
- Germany’s 10-year yield declined five basis points to 1.47%
- Britain’s 10-year yield declined two basis points to 2.68%
- Brent crude rose 0.7% to $100 a barrel
- Spot gold fell 0.1% to $1 721.82 an ounce
© 2022 Bloomberg