European stocks gained, buoyed by positive earnings, following a late rally in US shares in a volatile session after Federal Reserve Chair Jerome Powell passed up an opportunity to tamp down investor optimism.
(Bloomberg) — European stocks gained, buoyed by positive earnings, following a late rally in US shares in a volatile session after Federal Reserve Chair Jerome Powell passed up an opportunity to tamp down investor optimism.
The Stoxx Europe 600 index climbed about 0.6%, led by energy shares as Equinor ASA jumped after an earnings beat. ABN Amro Bank NV led banking stocks higher after announcing a share buyback. benchmark traded around 1% higher. US futures slipped after the S&P 500 advanced more than 1% Tuesday. The tech-heavy Nasdaq 100 outperformed major benchmarks, climbing more than 2%.
Stocks in Australia and South Korea advanced to push a region-wide benchmark of shares higher despite fluctuating trading in Chinese stocks and a flat day for Japanese equities. Treasury yields ticked lower and a gauge of the dollar was steady.
Powell’s sober comments echoed those made after last week’s FOMC meeting, soothing traders who were expecting the Fed chief to push back on the loosening of financial conditions and Friday’s bumper jobs report. Powell highlighted that disinflation has begun, and that further hikes will likely be needed if the jobs market remains strong.
In separate comments, Minneapolis Fed President Neel Kashkari said the Fed would likely have to raise interest rates to 5.4% at the top of its target range given the strength in the US jobs market. The Fed increased rates 25 basis points last week to a band of 4.5% to 4.75%.
Jone Foley, head of FX strategy for Rabobank, increased her expectations for US interest rates to peak at 5.5% after Powell’s remarks and said in an interview with Bloomberg Television that stock market investors had brushed aside the Fed chair’s hawkish tone.
“The equity market I think wants to see something a bit move dovish and it’s latching on to the fact that yes there is plenty of economic data out there in the US that suggests that manufacturing is slowing, that goods prices are slowing and supply chains are repairing,” she said. “We have probably had peak inflation and yes headline inflation can come down further but to try to get it down to 2% could be pretty tough.”
Read: Powell Says Further Rate Hikes Needed and Bonds Take Heed
Shares in Adani Enterprises climbed for a second day as investors reassessed the impact of the scathing report from Hindenburg Research published two weeks ago. Hedge fund and distressed debt investors have begun snapping up Adani company bonds. Ratings firm Moody’s said in a report that Indian banks’ exposure to the Adani Group is not large enough to affect their credit quality.
Elsewhere in markets, the price of oil extended gains after a 4.1% surge on Tuesday, its biggest one-day move since November, helped along by a rebound in demand from China.
Read: NYSE Plans to Pay in Full Majority of Claims Tied to Glitch
Key events:
- US wholesale inventories, Wednesday
- New York Fed President John Williams is interviewed at Wall Street Journal live event, Wednesday
- US initial jobless claims, Thursday
- ECB President Christine Lagarde participates in EU leaders summit, Thursday
- Bank of England Governor Andrew Bailey appears before Treasury Committee, Thursday
- US University of Michigan consumer sentiment, Friday
- Fed’s Christopher Waller and Patrick Harker speak, Friday
Some of the main moves in markets as of 3:42 p.m. Tokyo time:
Stocks
- The Stoxx Europe 600 rose 0.6% as of 8:12 a.m. London time
- S&P 500 futures fell 0.3%
- Nasdaq 100 futures fell 0.3%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The MSCI Asia Pacific Index rose 0.5%
- The MSCI Emerging Markets Index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.2% to $1.0748
- The Japanese yen rose 0.1% to 130.93 per dollar
- The offshore yuan was little changed at 6.7880 per dollar
- The British pound rose 0.3% to $1.2087
Cryptocurrencies
- Bitcoin was little changed at $23,197.66
- Ether rose 0.3% to $1,673.55
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.65%
- Germany’s 10-year yield advanced one basis point to 2.36%
- Britain’s 10-year yield was little changed at 3.32%
Commodities
- Brent crude rose 0.8% to $84.33 a barrel
- Spot gold rose 0.4% to $1,881.02 an ounce
This story was produced with the assistance of Bloomberg Automation.
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