(Bloomberg) — European stocks and US equity futures rose, while the dollar weakened as investors scaled back bets on how aggressively the Federal Reserve will tighten policy, easing recession fears.
Most Read from Bloomberg
The Stoxx Europe 600 advanced to its highest level in more than a month, led by mining and energy shares. Futures on the S&P 500 and Nasdaq 100 indices added at least 1%. West Texas Intermediate crude traded near $100 a barrel while the Bloomberg Dollar Spot Index slipped 0.5%, extending a retreat from a record high.
Traders are back to expecting a 75 basis points July Fed rate hike, after last week flirting with the prospect of a 100 basis points move after data showed no let-up in stubbornly high price pressures. But a drop in long-term US inflation expectations helped assuage concern that Fed policy is unequal to the hottest pressures in four decades.
Still, the outlook remains troubling for many investors. The International Monetary Fund will cut its global economic growth outlook “substantially” in its next update as nations run out of options to tackle worsening risks.
“Risk-reward at these levels has certainly improved but because we have not yet fully priced in a recession, it’s hard to say that the markets are screaming cheap,” said Anastasia Amoroso, the chief investment strategist at iCapital.
Elsewhere, a gauge of Asian shares climbed 1.4%, boosted by a jump in Chinese technology firms. Bitcoin scaled above $22,000 amid a broad crypto advance.
Commodities were broadly stronger after US President Joe Biden’s trip to the Middle East ended without a firm commitment from Saudi Arabia to boost crude supplies. Wheat climbed after a five-day slump and copper rallied.
US natural gas futures extended gains above the $7 level as scorching temperatures across the country boost air-conditioning demand. A heat wave in the UK and France pushed up European natural gas prices, exacerbating the region’s worst energy crunch in decades.
Officials and traders are closely watching whether the Nord Stream pipeline from Russia will fully return to service later this week, when it ends scheduled maintenance. Moscow has already curbed supplies to the continent amid tensions related to its invasion of Ukraine.
“The possibility that Russia stops, or severely reduces, their gas exports to Europe should keep markets on edge in the near-term,” Mizuho International Plc strategists Peter McCallum and Evelyne Gomez-Liechti wrote in a note to clients.
Key events to watch this week:
-
Earnings this week include Bank of America, Goldman Sachs, Tesla
-
US Treasury Secretary Janet Yellen visits South Korea. Tuesday
-
Reserve Bank of Australia releases July minutes. Tuesday
-
UK Chancellor Nadhim Zahawi and Bank of England Governor Andrew Bailey speak at event. Tuesday
-
Bloomberg Crypto Summit in New York. Tuesday
-
Bank of Japan, European Central Bank rate decisions. Thursday
-
Nord Stream 1 pipeline scheduled to reopen following maintenance. Thursday
Some of the main moves in markets:
Stocks
-
The Stoxx Europe 600 rose 1.3% as of 10:40 a.m. London time
-
Futures on the S&P 500 rose 1%
-
Futures on the Nasdaq 100 rose 1.2%
-
Futures on the Dow Jones Industrial Average rose 0.9%
-
The MSCI Asia Pacific Index rose 1.4%
-
The MSCI Emerging Markets Index rose 1.8%
Currencies
-
The Bloomberg Dollar Spot Index fell 0.5%
-
The euro rose 0.7% to $1.0147
-
The Japanese yen rose 0.3% to 138.22 per dollar
-
The offshore yuan rose 0.3% to 6.7404 per dollar
-
The British pound rose 0.9% to $1.1965
Bonds
-
The yield on 10-year Treasuries advanced four basis points to 2.95%
-
Germany’s 10-year yield advanced seven basis points to 1.21%
-
Britain’s 10-year yield advanced four basis points to 2.13%
Commodities
-
Brent crude rose 2.1% to $103.30 a barrel
-
Spot gold rose 0.9% to $1,723.25 an ounce
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.
