(Bloomberg) — US equity futures rallied Wednesday as a batch of resilient company earnings helped alleviate some of the wider caution in markets ahead of a pivotal Federal Reserve monetary-policy meeting.
Contracts on the tech-heavy Nasdaq 100 added 1.5%, while S&P 500 futures were up almost 1%. Microsoft Corp. jumped in extended US trading on a strong sales forecast, while Google parent Alphabet Inc.’s revenues assuaged investors’ worst fears. European contracts ticked higher.
Still, the mood remains edgy ahead of a much-anticipated Fed interest-rate increase — part of a global wave of monetary tightening to quell inflation that’s stoking concerns about a worldwide economic slowdown.
A gauge of Asian shares retreated amid falls in Hong Kong, tracking a close in the red for US stocks Tuesday before earnings lifted spirits after the bell. Australia’s bond yields and the currency declined on lower than expected inflation.
Treasury yields were little changed as traders brace for a widely telegraphed 75 basis-point Fed hike later Wednesday. The dollar dipped, oil was around $95 a barrel and Bitcoin peeked above $21,000.
The projected Fed move to tackle price pressures would cement a combined 150 basis points increase over June and July — the steepest rise in rates since the 1980s, when then chairman Paul Volcker wrestled with sky-high inflation.
The key question is whether Chair Jerome Powell’s policy signals validate or refute scaled-back bets projecting a 3.4% peak fed funds rate around year-end and cuts in 2023 to shore up an economy at risk of recession.
“The Fed hasn’t even gotten to neutral yet,” Jason England, global bonds portfolio manager at Janus Henderson Investors, said on Bloomberg Television. “For them to start easing already or for them to start seeing eases priced in is, I think, a little premature.”
IMF Warning
Monetary tightening, Europe’s energy woes amid Russia’s invasion of Ukraine and China’s property sector and Covid challenges are among the risks darkening the global outlook. The International Monetary Fund warned the world economy may soon be on the cusp of an outright recession.
US company earnings are providing a sliver of hope — more than three-quarters of firms that have reported so far either beat or met expectations. But there are doubts about how long they can weather economic challenges.
“Inflation is hurting companies and the question is whether these policy rate hikes are going to do anything to alleviate the pain,” Quadratic Capital Management founder Nancy Davis said on Bloomberg Television.
Elsewhere, President Joe Biden will speak with Chinese leader Xi Jinping on Thursday amid fresh tensions over Taiwan. The White House is also considering whether to lift some tariffs on Chinese imports to stem inflation.
Here are some key events to watch this week:
- Apple, Amazon, Meta earnings due this week
- Fed policy decision, briefing, Wednesday
- Australia CPI, Wednesday
- US GDP, Thursday
- Euro-area CPI, Friday
- US PCE deflator, personal income, University of Michigan consumer sentiment, Friday
Musk, Tesla and Twitter are this week’s theme of the MLIV Pulse survey. Also share your views on the S&P 500’s biggest stocks. Click here to get involved anonymously.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.9% as of 7 a.m. in London. The S&P 500 fell 1.2%
- Nasdaq 100 futures increased 1.5%. The Nasdaq 100 fell 2%
- Japan’s Topix index rose 0.1%
- Australia’s S&P/ASX 200 index climbed 0.3%
- South Korea’s Kospi index declined 0.1%
- China’s Shanghai Composite Index was little changed
- Hong Kong’s Hang Seng Index fell 1.1%
- Euro Stoxx 50 futures rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index dipped 0.2%
- The euro was at $1.0146, up 0.3%
- The Japanese yen was at 136.92 per dollar
- The offshore yuan was at 6.7632 per dollar, up 0.1%
Bonds
- The yield on 10-year Treasuries was little changed at 2.80%
- Australia’s 10-year yield fell seven basis points to 3.28%
Commodities
- West Texas Intermediate crude was at $95.82 a barrel, up 0.9%
- Gold was at $1,719.10 an ounce
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