The dollar erased an advance and the pound swung to a gain after a report that raised the prospect of the Bank of England extending its emergency bond buying. US stock futures jumped and Asian equity markets pared losses amid a shift in risk sentiment.
(Bloomberg) — The dollar erased an advance and the pound swung to a gain after a report that raised the prospect of the Bank of England extending its emergency bond buying. US stock futures jumped and Asian equity markets pared losses amid a shift in risk sentiment.
The Financial Times reported that the BOE told lenders it was prepared to extend its emergency bond-buying program past its Oct. 14 deadline to stave off a crisis in UK pensions. This ran counter to a vow on Tuesday from Governor Andrew Bailey to end purchases as scheduled.
Gilts and the pound held gains even after a report showed the UK economy shrank unexpectedly in August for the first time in two months, raising the possibility that the country is now in a recession. Ten-year Treasury yields fell after closing at a decade high on Tuesday, while most European bonds fell.
The unwinding in market moves on Wednesday arrested the greenback’s rally while the yen remained around levels that previously triggered intervention as investors prepare for higher US rates while the Bank of Japan sticks with ultra-easy policy.
“I don’t see any imbalances yet that would cause a pivot from the Fed,” Citigroup Inc. economist Veronica Clark said on Bloomberg Television. “The Fed will pay attention to global financial stability concerns, a strong dollar is part of that, but it’s ultimately going to be domestic conditions and what the Fed is seeing on inflation.”
Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”
Elsewhere, gold and oil prices rose.
US President Joe Biden said a recession was possible, while Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion.
Key events this week:
- Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
- FOMC minutes for September meeting, Wednesday
- US PPI, mortgage applications, Wednesday
- OPEC Monthly Oil Market Report, Wednesday
- Fed’s Michelle Bowman and Neel Kashkari speak
- ECB’s Christine Lagarde speaks
- US CPI, initial jobless claims, Thursday
- G-20 finance ministers and central bankers meet, Thursday
- China CPI, PPI, trade, Friday
- US retail sales, business inventories, University of Michigan consumer sentiment, Friday
- BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.9% as of 7:40 a.m. London time
- Futures on the Nasdaq 100 rose 1.1%
- Futures on the Dow Jones Industrial Average rose 0.7%
- The MSCI Asia Pacific Index fell 2.2%
- The MSCI Emerging Markets Index fell 2.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $0.9727
- The Japanese yen fell 0.2% to 146.15 per dollar
- The offshore yuan rose 0.2% to 7.1575 per dollar
- The British pound rose 0.3% to $1.0996
Cryptocurrencies
- Bitcoin rose 0.8% to $19,170.43
- Ether rose 1.3% to $1,298.05
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.90%
- Germany’s 10-year yield advanced three basis points to 2.33%
- Britain’s 10-year yield declined three basis points to 4.44%
Commodities
- Brent crude rose 0.4% to $94.70 a barrel
- Spot gold rose 0.5% to $1,674.60 an ounce
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
