(Bloomberg) — U.S. equity futures climbed with European stocks on Monday as markets regained a measure of calm following volatility spurred by the Federal Reserve’s surprise hawkishness.
Contracts on the S&P 500 advanced after spending most of the Asia session in the red. The Stoxx 600 Index also rebounded from an earlier loss, with U.K. grocer Wm Morrison Supermarkets Plc surging 32% after rejecting an unsolicited takeover bid, sending shares of peers Tesco Plc and J Sainsbury Plc higher.
Earlier, speculation that faster-than-expected policy tightening by the Federal Reserve would sink the reflation trade spurred caution across markets. The 30-year U.S. Treasury yield dropped below 2% for the first time since February. Asian markets slumped, with the Nikkei 225 down 4% at one point.
But the risk-off mood eventually faded, with the 30-year yield turning higher and a gauge of the dollar reversing an earlier gain. WTI crude oil rose to around $72 a barrel.
Traders will be paying close attention to this week’s appearances by Fed policy makers, including Chair Jerome Powell, for more guidance on a possible timeline for tapering asset purchases. Last week, officials sped up their expected pace of policy tightening amid optimism about the labor market and heightened concerns over price pressures in the recovery from the pandemic.
“We have another possibly two years before the Fed starts to take action,” John Woods, Asia Pacific chief investment officer at Credit Suisse Group AG, said on Bloomberg Television. “So I do anticipate there will be a period of choppy, sideways trading as the volatility associated with this debate in the Fed is reflected in pricing, but absolutely I take the view that yields will tick a little higher.”
Elsewhere, cryptocurrencies fell back, hurt by a general worsening of investor sentiment as well as China’s ongoing crackdown on Bitcoin mining and the prospect of tighter regulations elsewhere.
For more market commentary, follow the MLIV blog.
Here are some events to watch this week:
St. Louis Fed President James Bullard, Dallas Fed President Robert Kaplan and New York Fed President John Williams are among Fed speakers, as traders weigh up the central bank’s messaging shift, which has the potential to whiplash assetsEuropean Central Bank President Christine Lagarde addresses the European Parliament MondayFed Chair Jerome Powell testifies at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs TuesdayBank of England interest rate decision Thursday
These are some of the main moves in financial markets:
Stocks
The Stoxx Europe 600 rose 0.3% as of 10:37 a.m. London timeFutures on the S&P 500 rose 0.5%Futures on the Nasdaq 100 rose 0.6%Futures on the Dow Jones Industrial Average rose 0.6%The MSCI Asia Pacific Index fell 1.5%The MSCI Emerging Markets Index fell 0.8%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%The euro rose 0.3% to $1.1897The Japanese yen rose 0.1% to 110.09 per dollarThe offshore yuan fell 0.2% to 6.4742 per dollarThe British pound rose 0.5% to $1.3878
Bonds
The yield on 10-year Treasuries was little changed at 1.43%Germany’s 10-year yield was little changed at -0.20%Britain’s 10-year yield was little changed at 0.75%
Commodities
Brent crude rose 0.4% to $73.79 a barrelSpot gold rose 1.1% to $1,783.33 an ounce
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