US equity-index futures rose as investors grew confident the Federal Reserve’s peak interest rate would be within levels already priced in by markets.
(Bloomberg) — US equity-index futures rose as investors grew confident the Federal Reserve’s peak interest rate would be within levels already priced in by markets.
Contracts on the S&P 500 and Nasdaq 100 climbed at least 0.5% each after the underlying indexes avoided a selloff following the Fed’s minutes and remarks by officials. The dollar and Treasuries traded lower. Europe’s equity benchmark halted a two-day loss as Nvidia Corp.’s bullish outlook sparked gains in global technology shares. Japan was closed for a holiday.
After months of divergence over the perceived path of monetary tightening, the Fed and markets are increasingly getting aligned in their expectations, reducing the scope for hawkish shocks. While the minutes and comments by Fed officials including James Bullard reiterated a continuing preference for rate hikes, they didn’t say anything that wasn’t factored in by the market’s aggressive repricing of Fed bets in recent weeks.
“One of our big concerns coming into this year was the market was anticipating an event that wasn’t likely to occur, that being a dovish Fed pivot,” Danielle Poli, co-portfolio manager of the diversified income fund for Oaktree Capital Management, said in an interview with Bloomberg Television. “The market has woken back up a little bit in these last two weeks.”
The dollar traded marginally weaker, having come off day’s lows. The Australian dollar showed the biggest gain against the greenback on stronger-than-expected business investment data and dip-buying by exporters.
Treasury yields rose across the curve, with the 10-year rate adding 3 basis points to 3.95%.
Traders are now pricing in a Fed peak rate of 5.55% by July, compared with 4.90% they were betting on at the start of year. However, Fed officials haven’t grown more aggressive during this time: Fed Bank of St. Louis President Bullard reiterated his earlier stance, saying “I’m still at 5.375%.” Markets fully price in a 25 basis-point hike in March, but assign a 24% probability for a 50-point hike.
US Jobless claims data due Thursday may help shine a light on the strength of the labor market, which has remained stubbornly robust through the rate-hiking cycle. Eurozone inflation data due today will also help investors outline the health of the European economy.
In stocks, South Korea’s benchmark rose the most in a week and the won advanced after the central bank kept its benchmark interest rate unchanged with its first pause in rate increases in a year.
In Europe, technology and automotive shares were the best performers on the Stoxx 600, while commodity and health-care names underperformed. Rolls-Royce Holdings Plc shares soared as much as 25% after the company’s full-year earnings.
New York premarket trading saw NVidia jump 10%. The chipmaker presented a bullish revenue outlook for the current quarter, suggesting that a push into artificial intelligence processors is helping offset sluggish demand for personal computer chips.
Oil gained — after the longest run of losses this year — as traders took stock of a mixed demand outlook of tightening US monetary policy and China’s reopening.
Key events this week:
- US GDP, initial jobless claims, Thursday
- Atlanta Fed President Raphael Bostic speaks, Thursday
- BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday
- US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday
- Russia’s invasion of Ukraine hits the one-year mark, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.5% as of 7:23 a.m. New York time
- Nasdaq 100 futures rose 0.9%
- Futures on the Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0606
- The British pound was little changed at $1.2037
- The Japanese yen fell 0.1% to 135.04 per dollar
Cryptocurrencies
- Bitcoin rose 0.2% to $23,850.21
- Ether rose 1.5% to $1,644.09
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.95%
- Germany’s 10-year yield advanced two basis points to 2.54%
- Britain’s 10-year yield advanced four basis points to 3.64%
Commodities
- West Texas Intermediate crude rose 1.1% to $74.74 a barrel
- Gold futures fell 0.5% to $1,833.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Akshay Chinchalkar, Richard Henderson, Alice Gledhill and James Hirai.
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