A bullish start to the fourth quarter deepened in global markets, lifting US index futures and Treasuries, as investors wagered the end of monetary tightening is mere months away. The dollar slid for a second day.
(Bloomberg) — A bullish start to the fourth quarter deepened in global markets, lifting US index futures and Treasuries, as investors wagered the end of monetary tightening is mere months away. The dollar slid for a second day.
Futures on the Nasdaq 100 jumped more than 2.1%, while those on the S&P 500 rose 1.7%, signaling a second-day rally in New York markets. Europe’s equity benchmark headed for the best day since June. The two-year Treasury yield briefly plunged below the 4% mark. Oil advanced on expectations the OPEC+ alliance will deliver a substantial supply cut.
Investors see weaker-than-estimated US manufacturing data supporting a dovish tilt at the Federal Reserve after 3 percentage points of hikes began to tell on the economy. Money markets are now pricing the Fed Funds Rate peaking below 4.5% by March. Speculation is growing that the global wave of disruptive monetary tightening is nearing its end, especially after the Reserve Bank of Australia raised rates by half as much as expected.
“While the more rational approach outlined by the RBA does not bring forward rate cuts, it offers the possibility of stepping back from the more extreme hawkishness of recent weeks,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note. “That implies bull steepening in bond markets and should provide some support for equity markets if other central banks follow suit.”
Money markets signal the Fed will hike rates a further 125 basis points at most by March compared with as much as 165 basis points seen following the third three-quarter point increase last month. This paring-back of expectations spurred a rally in Treasuries across the curve on Tuesday. The 10-year rate shed 5 basis points, while the two-year yield slid as many as 12 basis points to trade at 3.99%.
The dollar headed for the lowest level since Sept. 22, with a rebounding British pound acting as the biggest drag. The UK’s withdrawal of a tax-cut plan soothed nerves about the government’s fiscal health, though doubts remained about the outlook for the currency.
Europe’s Stoxx 600 rallied 2.6%, lifted by gains on travel, technology and retail companies. Credit Suisse Group AG climbed as much a 6% as investors returned to the stock that hit all-time lows amid concern over the bank’s futur3e.
Electric-vehicle makers rose in New York premarket trading. Rivian Automotive Inc. soared more than 9% after reaffirming its goal to build 25,000 EVs this year, while Tesla Inc. advanced 3.8% on a report that Cathie Wood’s Ark Investment Management LLC had bought the shares.
West Texas Intermediate rose above $84 a barrel, having rallied more than 5% on Monday for its biggest one-day gain since May. The Organization of Petroleum Exporting Countries and its allies including Russia will consider reducing output by more than 1 million barrels a day when they meet on Wednesday, according to delegates.
Key events this week:
- US factory orders, durable goods, Tuesday
- Fed’s John Williams, Lorie Logan, Loretta Mester, Mary Daly speak at events, Tuesday
- Eurozone services PMIs, Wednesday
- OPEC+ meeting begins, Wednesday
- Fed’s Raphael Bostic speaks, Wednesday
- The Reserve Bank of New Zealand meets, Wednesday
- Eurozone retail sales, Thursday
- US initial jobless claims, Thursday
- Fed’s Charles Evans, Lisa Cook, Loretta Mester speak at events, Thursday
- US unemployment, wholesale inventories, nonfarm payrolls, Friday
- BOE Deputy Governor Dave Ramsden speaks at event, Friday
- Fed’s John Williams speaks at event, Friday
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Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 1.7% as of 8:07 a.m. New York time
- Futures on the Nasdaq 100 rose 2.1%
- Futures on the Dow Jones Industrial Average rose 1.5%
- The Stoxx Europe 600 rose 2.6%
- The MSCI World index rose 0.9%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.7% to $0.9895
- The British pound rose 0.2% to $1.1340
- The Japanese yen fell 0.2% to 144.84 per dollar
Cryptocurrencies
- Bitcoin rose 1.9% to $19,962.08
- Ether rose 2.1% to $1,351.99
Bonds
- The yield on 10-year Treasuries declined five basis points to 3.59%
- Germany’s 10-year yield declined eight basis points to 1.83%
- Britain’s 10-year yield declined 15 basis points to 3.82%
Commodities
- West Texas Intermediate crude rose 1.3% to $84.75 a barrel
- Gold futures rose 0.7% to $1,714.40 an ounce
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