(Bloomberg) — US equities climbed and Treasuries pared declines as investors assessed developments in the debate over how much central bank monetary policy tightening is needed to fight inflation.
The S&P 500 gained 0.8%, led by technology shares, while the Nasdaq 100 added 1.3%. The yield on 10-year Treasury was little changed after earlier gains as metals including gold, silver and copper spiked higher. The dollar pared an advance against major peers.
Oil rose as investors assessed the future of OPEC+ unity, just as ministers from the group prepare to meet on Thursday to discuss its supply policy for July. Crude advanced about 10% in May, stoking more inflation worries.
Concerns that central-bank rate hikes may induce a recession are keeping investors guessing about the outlook for the economy as rising food and energy costs squeeze consumers, and volatility has picked up.
“We now find ourselves in a little bit more no man’s land,” Greg Boutle, US head of equity and derivative strategy at BNP Paribas, said in Bloomberg TV. “We are in this kind of a bear market environment yet we haven’t seen recession manifest in a macro data yet. So we still think there is a path for the US economy to have a soft rather than a hard landing.”
Europe’s Stoxx 600 Index was little changed in the wake of euro-zone figures Tuesday that showed a record jump in consumer prices. The data strengthen the case for the European Central Bank to lift interest rates by a half-point in July, according to Austrian central bank chief and Governing Council member Robert Holzmann.
“There are heightened concerns around inflation and where central banks are likely to go trying to combat inflation,” Kristina Hooper, Invesco Advisers chief global markets strategist, said on Bloomberg Radio. “This has gone from just an inflation scare to a growth scare. Uncertainty has grown.”
Citigroup Inc. strategists said that after a difficult first five months of 2022, the pain may not be over yet for global equity markets. The prospect of downward revisions to earnings estimates is the latest headwind to face stock investors, already rattled by runaway inflation and the potential impact of central-bank tightening aimed at controlling it, the strategists led by Jamie Fahy wrote in a note.
Among individual stock moves, Salesforce Inc. climbed after the cloud-based customer management software company raised its annual profit forecast. ChargePoint Holdings Inc. slipped as analysts noted that the EV charging network firm’s margins came under pressure due to rising costs and supply-chain disruption. And Delta Air Lines Inc. wavered after raising its revenue outlook.
How will markets be affected by the Fed’s quantitative tightening? QT officially starts Wednesday and is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.
Here are some key events to watch this week:
- The Federal Reserve is set to start shrinking its $8.9 trillion balance sheet Wednesday
- The Fed releases its Beige Book report on regional economic conditions Wednesday
- New York Fed President John Williams, St. Louis Fed President James Bullard speak at separate events Wednesday
- OPEC+ virtual meeting Wednesday
- Cleveland Fed President Loretta Mester discusses the economic outlook Thursday
- US May employment report Friday
- The UN’s Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.8% as of 9:38 a.m. New York time
- The Nasdaq 100 rose 1.3%
- The Dow Jones Industrial Average rose 0.7%
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.0719
- The British pound fell 0.4% to $1.2550
- The Japanese yen fell 0.6% to 129.44 per dollar
Bonds
- The yield on 10-year Treasuries advanced one basis point to 2.86%
- Germany’s 10-year yield advanced one basis point to 1.13%
- Britain’s 10-year yield was little changed at 2.11%
Commodities
- West Texas Intermediate crude rose 2.8% to $117.83 a barrel
- Gold futures were little changed
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