US index futures and European stocks rallied as the euphoria over falling inflation in the world’s largest economy extended into a second day and China relaxed some Covid restrictions.
(Bloomberg) — US index futures and European stocks rallied as the euphoria over falling inflation in the world’s largest economy extended into a second day and China relaxed some Covid restrictions.
December contracts on the S&P 500 and Nasdaq 100 indexes rose at least 0.6% each after US stocks surged the most since early 2020 on Thursday.
Europe’s equity benchmark headed for the best week since March. The dollar was poised for a fourth week of losses, the longest streak since in more than two years. Treasury futures weakened with the cash market closed for a US holiday.
Risk sentiment has come back roaring into global markets after a sharper-than-forecast drop in US inflation improved the prospects of a dovish tilt by the Federal Reserve.
However, some money managers warn that such expectations are misplaced as the central bank won’t consider its job done until inflation reaches its target of 2%, far below the October level of 7.7%.
“The Fed will want to see several consecutive months of tamer inflation before considering a pivot to a more dovish posture,” Mark Haefele, the chief investment officer of UBS Global Wealth Management, wrote in a note.
“Services inflation remains a worry. The Fed needs to see signs of a cooling labor market.”
Europe’s Stoxx 600 Index rose for a second day, taking its weekly gain to 4.2%. This is the first time in a year that the gauge has risen for four consecutive weeks.
Consumer, commodity and technology stocks, which are the most sensitive to economic activity, led the gains.
A gauge of Hong Kong-listed technology stocks surged 10% after China reduced the amount of time travelers and close contacts must spend in quarantine.
The pivot came hot on heels of a call by leaders in Beijing for more precise and targeted virus control measures. The measures also validate persistent market expectations for an end to China’s Covid Zero policy, which officials have repeatedly denied.
Cryptocurrency resumed a selloff amid FTX’s deepening woes.
OIl rallied on bets for improving demand from China.
Fed officials appeared to back a downshift in rate hikes after a stretch of four jumbo-sized increases. They also stressed the need for policy to remain tight.
Dallas Fed President Lorie Logan said it may soon be appropriate to slow the pace to better assess economic conditions.
San Francisco’s Mary Daly said the moderation was “good news,” but noted “pausing is not the discussion, the discussion is stepping down.”
Key events this week:
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.5% as of 8:39 a.m.
London time
- Futures on the S&P 500 rose 0.6%
- Futures on the Nasdaq 100 rose 0.8%
- Futures on the Dow Jones Industrial Average rose 0.6%
- The MSCI Asia Pacific Index rose 4.6%
- The MSCI Emerging Markets Index rose 4.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.4% to $1.0248
- The Japanese yen fell 0.1% to 141.15 per dollar
- The offshore yuan rose 0.6% to 7.1109 per dollar
- The British pound was little changed at $1.1727
Cryptocurrencies
- Bitcoin fell 2.4% to $17,376.33
- Ether fell 3.3% to $1,277.92
Bonds
- The yield on 10-year Treasuries was little changed at 3.81%
- Germany’s 10-year yield advanced six basis points to 2.07%
- Britain’s 10-year yield advanced four basis points to 3.34%
Commodities
- Brent crude rose 2.4% to $95.91 a barrel
- Spot gold rose 0.3% to $1,760.11 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Georgina Mckay, Masaki Kondo, Tassia Sipahutar and Farah Elbahrawy.
More stories like this are available on bloomberg.com
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