(Bloomberg) — Gains fueled by dip-buying waned, leaving U.S. index futures and European stocks with smaller advances, as lingering global-growth risks offset a debt-ceiling deal in Washington and central-bank assurances about transitory inflation.
Most Read from Bloomberg
December contracts on the S&P 500 Index rose 0.4% after earlier jumping as much as 0.9%, while Europe’s Stoxx 600 gauge was 0.2% higher. The dollar erased losses. Treasury yields were steady. Oil-and-gas companies APA Corp. and Devon Energy Corp. led premarket gains among S&P 500 members.
An agreement among U.S. lawmakers to extend government funding removes one uncertainty from a litany of risks investors are contenting with, ranging from China’s growth slowdown to Federal Reserve tapering. Fed Chair Jerome Powell and his European counterpart Christine Lagarde have reiterated their view elevated inflation is transitory, seeking to allay a key concern that’s boosted bond yields and depressed equity valuations.
“Republicans and Democrats showed some compromise by averting a government shutdown,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “By removing what felt like a significant risk for a retail audience, it helps sentiment in the equity market.”
Global stocks are poised to end the quarter with a small loss, after a five-quarter rally, as investors brace for the Fed to wind down its stimulus. They also remain concerned about slowing growth and elevated inflation, supply-chain bottlenecks, an energy crunch and regulatory risks emanating from China. A majority of participants in a Citigroup Inc. survey said a 20% pullback in stocks is more likely than a 20% rally.
At the same time, some investors believe equities can grind higher, albeit amid volatility, as they see inflationary risks as temporary and bet on post-pandemic growth. They’re buying stocks after every meaningful drop.
Such dip-buying boosted equities during early European hours. The Stoxx 600 equities gauge trimmed a monthly loss. Miners paced the gains as iron ore climbed. Technology stocks, battered earlier this week, also extended their rebound.
Oil surrendered gains, still heading for a monthly gain amid tighter supplies. West Texas Intermediate futures briefly recaptured the level above $75 per barrel, before trading at $74.71. APA and Devon rose at least 1.8% in early New York trading.
Senate Majority Leader Chuck Schumer said Wednesday lawmakers had reached an agreement to avoid a government shutdown on Friday, extending government spending until Dec. 3. Earlier, Powell and his counterparts in Japan, Europe and the U.K. voiced cautious optimism that supply-chain disruptions lifting inflation rates around the world would ultimately prove temporary.
“Equity markets are supported by the belief that the government and Fed have the problems under control,” Nordea’s Galy said. “Yes, there are a series of shocks percolating through the economy but it is a well managed process.”
Here are some events to watch this week:
-
House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday
-
Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
-
Futures on the S&P 500 rose 0.4% as of 6:41 a.m. New York time
-
Futures on the Nasdaq 100 rose 0.4%
-
Futures on the Dow Jones Industrial Average rose 0.4%
-
The Stoxx Europe 600 rose 0.3%
-
The MSCI World index was little changed
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro fell 0.2% to $1.1570
-
The British pound rose 0.1% to $1.3445
-
The Japanese yen was little changed at 112.02 per dollar
Bonds
-
The yield on 10-year Treasuries advanced one basis point to 1.53%
-
Germany’s 10-year yield was little changed at -0.21%
-
Britain’s 10-year yield advanced two basis points to 1.01%
Commodities
Most Read from Bloomberg Businessweek
©2021 Bloomberg L.P.
