European stocks posted modest gains and US equity futures were steady as investors weighed weak factory data against inflation concerns from OPEC+’s plan to cut oil output to assess the path of interest rate increases.
(Bloomberg) — European stocks posted modest gains and US equity futures were steady as investors weighed weak factory data against inflation concerns from OPEC+’s plan to cut oil output to assess the path of interest rate increases.
Basic resources and real estate shares led the advance in the Stoxx Europe 600 Index. Glencore Plc rose amid its continued interest in a takeover of Canadian miner Teck Resources Ltd. Contracts for US indexes were little changed following a mixed session Monday on Wall Street. In Asia, declines in Chinese technology stocks pulled MSCI Inc.’s Asia-Pacific benchmark slightly lower.
The two-year Treasury yields steadied at around 3.97% Tuesday after being at the center of the action in the US hours when they swung from sharp gains to close lower.
A measure of US factory activity contracted by more than expected, data Monday showed, tempering worries about inflation following the OPEC+ announcement. Investors are trying to assess how the Federal Reserve will interpret economic data as it continues its campaign to tame rising consumer prices, with markets pricing one more rate hike from the US central bank.
Yields on Australia’s policy-sensitive three-year government bond dropped about eight basis points following the central bank’s decision to pause its almost yearlong tightening cycle amid signs of moderating inflation and uncertainty over the economic outlook.
A gauge of greenback strength was barely changed after a decline on Monday. The euro was muted as investors awaited data on regional producer prices that are projected to show continued month-on-month weakness.
In the US, Federal Reserve Bank of St. Louis President James Bullard told Bloomberg Television that OPEC+’s decision to cut output was unexpected and an increase in oil prices could make the Fed’s job of lowering inflation more challenging. “Whether it will have a lasting impact I think is an open question,” he said.
As the possibility of a recession looks more likely, the upcoming earnings season may be the first of challenging quarters.
JPMorgan Chase & Co. strategist Marko Kolanovic reiterated the bank’s underweight call on equities in a note to clients, warning that “stocks are set to weaken for the remainder of the year” as headwinds from banking turbulence, oil shocks, and slowing growth linger.
Further into the week, the US government’s monthly employment report will be released Friday and will give a fuller picture of the job market. Swaps linked to Fed interest-rate expectations showed a quarter-point hike in May as more likely than not.
“I would lean in the direction that over the course of the second half of the year, the Fed is going to have to turn more supportive,” Stephen Gallo, global FX strategist at BMO Capital Markets, said on Bloomberg Television. “Maybe not with easing in Q3, which is there’s a chance of that priced in right now by the rates market, but probably turning a bit more supportive, at least with its language.”
In commodities, oil built on the largest gain in a year after OPEC+ delivered an unexpected and substantial production cut in a shift that tightened the global crude market, widened key timespreads, and likely punished short sellers. Gold traded lower.
Key events this week:
- Eurozone PPI, Tuesday
- US factory orders, US durable goods, Tuesday
- Cleveland Fed President Loretta Mester speaks, Tuesday
- Eurozone S&P Global Eurozone Services PMI, Wednesday
- US trade, Wednesday
- UBS annual general meeting, Wednesday
- US initial jobless claims, Thursday
- St. Louis Fed President James Bullard speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.3% as of 8:31 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.2%
- The MSCI Emerging Markets Index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0908
- The Japanese yen fell 0.2% to 132.76 per dollar
- The offshore yuan fell 0.1% to 6.8845 per dollar
- The British pound rose 0.2% to $1.2441
Cryptocurrencies
- Bitcoin rose 1.6% to $28,035.22
- Ether rose 2% to $1,816.42
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.43%
- Germany’s 10-year yield advanced three basis points to 2.29%
- Britain’s 10-year yield advanced three basis points to 3.46%
Commodities
- Brent crude rose 0.7% to $85.54 a barrel
- Spot gold fell 0.2% to $1,980.08 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott.
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