Stocks rose on Tuesday as investor sentiment stabilized following a rout sparked by the Federal Reserve’s signal of a sustained period of restrictive monetary policy to quell inflation. Treasury yields and the dollar slipped.
(Bloomberg) — Stocks rose on Tuesday as investor sentiment stabilized following a rout sparked by the Federal Reserve’s signal of a sustained period of restrictive monetary policy to quell inflation.
Treasury yields and the dollar slipped.
US futures rallied, signaling a break in the equity slump that began Friday when Chair Jerome Powell stressed the Fed is willing to let the economy suffer to cool price pressures.
Cryptocurrency-tied stocks climbed in premarket trading as Bitcoin advanced. Twitter Inc. fell after Elon Musk cited recent accusations from a whistle-blower as a new reason to terminate the $44 billion takeover.
Banks led gains in Europe, while energy companies underperformed as prices plunged on signs that the region is stepping up efforts to curb a crisis.
Gold slipped.
Euro-area economic confidence dropped to its lowest level in 1 1/2 years. German inflation quickened to an all-time high, bolstering calls for a jumbo interest-rate increase when the European Central Bank meets next week.
Governing Council member Klaas Knot said the ECB should continue raising interest rates quickly as inflation in the currency bloc will probably remain elevated for the foreseeable future.
Meanwhile, bonds are sliding toward the first bear market in a generation, burning investors who erred in bets that central banks would pivot away from rapid interest-rate hikes.
Powell’s push back against market hopes for a pivot to interest-rate cuts next year is the latest setback in a challenging year for investors.
The Fed this week is also set to step up the unwinding of its near-$9 trillion balance sheet. Other risks range from China’s economic slowdown to an energy crisis that threatens to tip Europe into recession with winter approaching.
“The markets are spooked because they are afraid that the Fed could create a hard landing — that they’ll raise rates into a recession and that will be really painful for the economy and for corporate profits,” Terri Spath, chief investment officer at Zuma Wealth LLC, said on Bloomberg Television.
Minneapolis Fed President Neel Kashkari said sharp stock-market losses show investors have got the message that the US central bank is determined to contain inflation.
“People now understand the seriousness of our commitment to getting inflation back down to 2%,” he said.
While Credit Suisse Group AG recommended investors go underweight global equities following the Jackson Hole symposium, JPMorgan Chase & Co.
strategists say that a reading on the US labor market that spells bad news for the economy is actually a bullish signal for stocks.
Meanwhile, China’s central bank set a stronger-than-expected yuan fixing for a fifth day, a sign it doesn’t want an excessively weak currency.
The move highlights how greenback strength is a challenge for Asia as the region’s currencies slip.
An Asian stock gauge rose as a climb in Japan helped to counter a retreat in Chinese tech shares.
Here are some key events to watch this week:
- US consumer confidence, Tuesday
- New York Fed President John Williams due to speak, Tuesday
- ECB Governing Council members due to speak at event Tuesday through Sept.
2
- China PMI, Wednesday
- Euro-area CPI, Wednesday
- Russia’s Gazprom set to halt Nord Stream pipeline gas flows for three days of maintenance, Wednesday
- Cleveland Fed President Loretta Mester due to speak, Wednesday
- China Caixin manufacturing PMI, Thursday
- US nonfarm payrolls, Friday
- UK leadership ballot closes Friday.
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Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.4% as of 8:35 a.m.
New York time
- Futures on the Nasdaq 100 rose 0.6%
- Futures on the Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index fell 1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0015
- The British pound fell 0.1% to $1.1693
- The Japanese yen rose 0.2% to 138.38 per dollar
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.08%
- Germany’s 10-year yield was little changed at 1.50%
- Britain’s 10-year yield advanced 15 basis points to 2.75%
Commodities
- West Texas Intermediate crude fell 2.4% to $94.64 a barrel
- Gold futures fell 0.4% to $1,742.70 an ounce
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