(Bloomberg) — US stock futures rose, signaling an extension of the rally spurred by Wednesday’s softer-than-expected US inflation data, even as Federal Reserve officials remained resolute on the need for further interest-rate increases.
(Bloomberg) — US stock futures rose, signaling an extension of the rally spurred by Wednesday’s softer-than-expected US inflation data, even as Federal Reserve officials remained resolute on the need for further interest-rate increases.
S&P 500 contracts advanced 0.5% after the underlying gauge hit a three-month high in the previous session. Those on the Nasdaq 100 also added 0.5% after the tech heavy index pulled 20% above a June low. Walt Disney Co. jumped in premarket following a strong performance by its streaming service. Bumble Inc. slid as the dating app company cut its revenue forecast.
US headline inflation was 8.5% in July, down from the 9.1% June print that was the largest in four decades. Fed officials were quick to stress more rate hikes are coming to counter price pressures and signaled investors should rethink expectations of cuts next year to shore up economic growth.
“Despite the Fed’s unwavering rhetoric, this release has given investors hope that the pace of rate rises in the US will slow and that the fabled soft landing may be less elusive than feared,” said Lewis Grant, head of global equities at Federated Hermes.
A dollar index slipped, adding to retreat a day earlier that was the biggest since the onset of the pandemic. Ten-year Treasury yields dropped after producer prices unexpectedly fell in July.
Europe’s Stoxx 600 Index struggled to hold on to gains. Drugmakers GSK Plc, Sanofi and Haleon Plc weighed on the market, slumping amid mounting concerns about litigation around recalled heartburn drug Zantac.
European Record
Crude oil rose as the International Energy Agency boosted its forecast for global demand growth this year as soaring natural gas prices and heat waves spur industry and power generators to switch their fuel to oil. OPEC, in contrast, said it expects global oil markets to tip into surplus this quarter.
European power prices climbed to fresh records on Thursday. Benchmark German power for next year increased as much as 4.5% to an all-time high of 446 euros a megawatt-hour. The French contract was up as much as 4.4%, rising above 600 euros. That’s more than $1,000 for the equivalent energy of a barrel of oil.
Bitcoin broke past $24,000 in a sign of the brighter sentiment in markets.
Market Surge After CPI Data Has Skeptics Issuing a Warning
On the US monetary policy front, Minneapolis Fed President Neel Kashkari said he wants the Fed’s benchmark interest rate at 3.9% by the end of this year and at 4.4% by the end of 2023.
‘Unacceptably High’
Alluding to market pricing of the Fed’s policy path, Kashkari said it was not realistic to conclude that the Fed will start cutting rates early next year, when inflation is very likely to be well in excess of the 2% goal.
Chicago counterpart Charles Evans said inflation remains “unacceptably high” and that “we will be increasing rates the rest of this year and into next year.”
Swaps referencing the Fed’s September meeting brought a half-point rate increase back into play as opposed to a bigger move. A key portion of the Treasury yield curve remains deeply inverted, a pattern widely thought to signal the risk of a recession.
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What to watch this week:
- US PPI, initial jobless claims, Thursday
- San Francisco Fed President Mary Daly is interviewed on Bloomberg Television, Thursday
- Euro-area industrial production, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.5% as of 8:37 a.m. New York time
- Futures on the Nasdaq 100 rose 0.5%
- Futures on the Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 was little changed
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.0329
- The British pound was little changed at $1.2215
- The Japanese yen rose 0.5% to 132.27 per dollar
Bonds
- The yield on 10-year Treasuries declined three basis points to 2.75%
- Germany’s 10-year yield was little changed at 0.88%
- Britain’s 10-year yield advanced two basis points to 1.97%
Commodities
- West Texas Intermediate crude rose 1.2% to $93.02 a barrel
- Gold futures were little changed
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