US Futures Rise With Central-Bank Moves in Focus: Markets Wrap

(Bloomberg) — US equity-index futures advanced at the start of a pivotal week for monetary-policy decisions from the Federal Reserve, European Central Bank and a host of their peers.

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Contracts on the S&P 500 and Nasdaq 100 indexes were about 0.3% higher after weekly losses for the underlying indexes. Treasuries advanced, with the 10-year yield shedding 5 basis points. Oil fell as traders weighed the demand outlook amid growing economic concerns. The Stoxx Europe 600 Index slides for the sixth time in seven days. Best Buy Co. advanced in premarket New York trading after Goldman Sachs Group Inc. upgraded the stock.

Investors are looking for firmer clues on how far and how fast central banks will tighten monetary policy from here on, as recession fears resurface. The Fed is projected to slow its hiking spree to a 50 basis-point move on Wednesday, though officials have said borrowing costs will need to remain restrictive for some time. US inflation figure on Tuesday will throw more light on whether that’s the case or markets have a case for expecting rate cuts in late 2023.

“Throughout this year, we have seen the Fed taking serious aggressive monetary-policy measures to control inflation,” Naeem Aslam, the chief markets analyst at Ava Trade Ltd., wrote in a note. “However, the last reading made the Fed believe that inflation has started to move in the right direction. This means that they need to do less as there is plenty more tailwind behind this which will continue to push inflation lower.”

Read: The 24 Hours of Hikes That End Year of Fighting Inflation

Still, a robust labor market and lingering concerns about inflation prevent traders from turning bullish. Disparities in the economic outlook between the world’s regions, from the resurgence of Covid in China to energy volatility in Europe, keep a lid on risk sentiment. The dollar was little changed, after posting a small gain earlier.

Following the Fed, the ECB will announce its rate decision Thursday, and may opt for a 50 basis-point hike. Markets also have to contend with decisions from the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.

While the tumult of this year has a gauge of global stocks headed for its biggest annual loss since 2008, the world’s biggest investors predict that stocks will see low double-digit gains in 2023. As many as 71% of respondents in a Bloomberg News survey expect equities to rise, versus 19% forecasting declines. For those seeing gains, the average response was a 10% return.

Europe’s equity benchmark fell. All its industry subgroups posted losses, with commodity companies being the biggest drag. An index of Asian equities dropped, ending a two-day winning streak. The rapid spread of Covid cases in China added to concern, with Hong Kong’s Hang Seng Index down about 2%.

Treasuries rose across the curve, with longer-dated securities seeing bigger yield decreases than the shorter ones.

West Texas Intermediate oil traded 0.9% lower. Crude remains on track for its first back-to-back quarterly decline since mid-2019 as the demand outlook sours and thin liquidity exacerbates price swings into the year-end.

Best Buy advanced 1.2% in early New York trading after Goldman rasied its recommendation on the stock to neutral from sell.

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Key events this week:

  • US ICC, Tuesday

  • FOMC rate decision and Fed Chair news conference, Wednesday

  • China medium-term lending, property investment, retail sales, industrial production, surveyed jobless, Thursday

  • ECB rate decision and ECB President Lagarde briefing, Thursday

  • Rate decisions for UK BOE, Mexico, Norway, Philippines, Switzerland, Taiwan, Thursday

  • US cross-border investment, business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday

  • Eurozone S&P Global PMI, CPI, Friday

Some of the main moves in markets:

Inventory

  • Futures on the S&P 500 rose 0.3% as of 6:01 am New York time

  • Futures on the Nasdaq 100 pink 0.3%

  • Futures on the Dow Jones Industrial Average rose 0.2%

  • The Stoxx Europe 600 fell 0.3%

  • The MSCI World index fell 0.2%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.2% to $1.0562

  • The British pound rose 0.2% to $1.2284

  • The Japanese yen was little changed at 136.68 per dollar

Cryptocurrencies

  • Bitcoin fell 0.7% to $16,987.45

  • Ether fell 0.8% to $1,255.41

Leaps

  • The yield on 10-year Treasuries declined five basis points to 3.53%

  • Germany’s 10-year yield declined three basis points to 1.90%

  • Britain’s 10-year yield declined seven basis points to 3.11%

Commodities

  • West Texas Intermediate crude fell 0.8% to $70.45 a barrel

  • Gold futures fell 0.4% to $1,803.40 an ounce

This story was produced with the assistance of Bloomberg Automation.

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