US index futures pointed to a higher open on Wall Street and European shares rebounded after two days of losses triggered by Federal Reserve signals that interest rates would continue to rise for a while yet.
(Bloomberg) — US index futures pointed to a higher open on Wall Street and European shares rebounded after two days of losses triggered by Federal Reserve signals that interest rates would continue to rise for a while yet.
Contracts on the US S&P 500 index added 0.7%, pointing to a recovery for the index which has slid more than 1% this week.
Futures on the Nasdaq 100 surged 0.9%. In the premarket, chip equipment maker Applied Materials rose 4.4% after issuing a forecast-topping sales forecast. A host of tech names, including chipmakers Nvidia Corp.
Meta Platforms Inc. and Amazon.com Inc., also gained.
The moves come a day after shares were knocked sharply lower by hawkish comments from St. Louis Fed President James Bullard, who said interest rates needed to rise at least to 5%-5.25% to curb inflation.
His comments prompted markets to dial up their expectations for how high US rates might go.
The dollar steadied after surging in the wake of Bullard’s comments, while Treasury yields inched higher.
But Bullard is only the latest policymaker to warn markets that while inflation appears to be easing off multi-decade highs, policy needs to be tightened further to tame price pressures.
However, some investors said hawkish commentary did not necessarily mean rates would peak at higher levels than previously thought.
“The Fed wants to ensure their job is not getting undone, the language is still robust and that there’s still a coordinated effort from board members to push on the hawkish button,” James Athey, investment director at Abrdn Investment Management Ltd., told Bloomberg Television.
“That doesn’t mean the destination is necessarily a higher rate than where markets thought a week or two ago. I think they’re just trying to downplay investor’s spirits a bit.”
Fears are mounting though, that relentlessly rising rates will hit economic growth, with a critical segment of the Treasury yield curve at the most steeply inverted in four decades — historically such an inversion has flagged recession in the world’s largest economy.
Growth-sensitive copper and oil prices were poised for weekly losses, pressured by concerns over a worsening demand outlook.
Analysts at Bank of America Corp. warned that with a Fed policy pivot likely only in June or July, rate hikes and company earnings could prove a headwind to stocks.
While investment inflows into equity funds swelled last week — lured by signs of a US inflation slowdown — “a fair chunk of the bear market rally is behind us,” they wrote.
Europe’s Stoxx index rose about 1%, led by energy, banking and utilities, and is now on track to extend a four-week rising streak
Earlier, Hong Kong’s benchmark Hang Seng Index enjoyed a third straight week of gains, thanks to China’s steps to support the property sector and ease Covid restrictions.
On Friday, the benchmark’s tech gauge touched a two-month high, led by Alibaba, which missed second-quarter revenues but upsized share buybacks.
Bitcoin was on course for a weekly gain even as the collapse of Sam Bankman-Fried’s FTX empire continues to rattle the crypto market.
Key events this week:
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.7% as of 7:45 a.m.
New York time
- Futures on the Nasdaq 100 rose 0.9%
- Futures on the Dow Jones Industrial Average rose 0.5%
- The Stoxx Europe 600 rose 1%
- The MSCI World index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0371
- The British pound rose 0.5% to $1.1921
- The Japanese yen rose 0.1% to 139.99 per dollar
Cryptocurrencies
- Bitcoin rose 0.5% to $16,757.3
- Ether rose 1% to $1,217.66
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.79%
- Germany’s 10-year yield advanced three basis points to 2.05%
- Britain’s 10-year yield advanced six basis points to 3.26%
Commodities
- West Texas Intermediate crude fell 1.2% to $80.65 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
