US Futures Signal Recovery After Sober Fed Talk: Markets Wrap

(Bloomberg) — U.S. equity futures showed a recovery on Wall Street Thursday, with European shares rising in sympathy, as investors weighed mixed economic signals about the health of the American economy and interest rates.

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Contracts on the tech-heavy Nasdaq 100 rose 0.4% after the underlying gauge ended down 1.5% on Wednesday. The S&P 500 added 0.3%, while the European stock benchmark is also ticking higher.

10-year Treasury yields edged higher after falling on Wednesday amid indications from Federal Reserve officials that policy would tighten further. A watched portion of the US yield curve remained near levels not seen in four decades – a sign of investor concern about the world’s largest economy.

In a scenario that has played out repeatedly across world markets in recent weeks, equities had to pause their multi-day rally on Wednesday, as US economic data was stronger than expected and the number of FED speakers reduced expected in the middle of the United States. the bank could end its rate hiking cycle earlier than expected.

“We know that every time global markets try to come to terms with speculation that the Fed’s tightening intentions may end, FOMC officials come out with a new piece of hawkish talk, to dispel any prospect of a dovish mitigate irrationality. ,” Simon Ballard, chief economist at First Abu Dhabi Bank, wrote in a note to investors.

With inflation beginning to ease but after hitting a two-decade high, and a measure of US retail sales increasing at the fastest pace in eight months, the message from Fed speakers was that more to do to extinguish price pressures.

Another San Francisco Fed President Mary Daly said that a pause in rate increases was “off the table,” and New York Fed President John Williams said the central bank should avoid incorporating financial stability risks in its considerations.

Goldman Sachs Group Inc. increased. its forecast for peak US interest rates to 5.25% at the top of the range, up from the previous call of 5%.

Other signs suggest the world’s largest economy is losing steam as American consumers are squeezed by the highest inflation in four decades. Retailer Target Corp. undershot forecasts on Wednesday, saying a withdrawal from US shoppers had hit earnings.

“The overall macro outlook for the US economy is one of fragile strength and this scenario continues to favor a modest easing – and then a plateau – in the pace of incremental tightening,” Ballard wrote.

Oil losses widened as investors shifted their focus back to concerns about the demand outlook after geopolitical tensions eased.

Gold fell in Asia as hawkish expectations outweighed hopes of moderating rate hikes.

In Britain, Chancellor Jeremy Hunt is expected to detail spending cuts as well as tax rises to repair the hole in the government’s finances but will have to tread carefully as a new round of austerity could further cut the an economy facing the worst cost. squeeze live in four decades.

Read more: Watch UK Domestic Stocks as Chancellor Hunt Delivers Budget

The pound rallied, poised to break above $1.20, after falling towards parity in September. While there is consensus that Hunt will stick to fiscal orthodoxy, traders are wary of being on guard again.

This week’s highlights:

  • Euro Area CPI, Thursday

  • US housing starts, initial jobless claims, on Thursday

  • Neel Kashkari Fed, Loretta Mester, speaks Thursday

  • The US Conference Board’s leading index, existing home sales, on Friday

Some of the main moves in the markets:

Stock

  • The Stoxx Europe 600 rose 0.2% as of 8:41 London time

  • S&P 500 futures rose 0.3%

  • Futures on the Nasdaq 100 rose 0.4%

  • Futures on the Dow Jones Industrial Average rose 0.3%

  • MSCI Asia Pacific Index fell 0.5%

  • MSCI Emerging Markets Index fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0398

  • The Japanese yen rose 0.2% to 139.24 per dollar

  • The offshore yuan fell 0.3% to 7.1296 per dollar

  • The British pound rose 0.2% to $1.1937

Cryptocurrency

  • Bitcoin increased 0.3% to $16,578.2

  • Ether fell 0.3% to $1,202.25

Bonds

  • The yield on 10-year Treasuries advanced two basis points to 3.71%

  • Germany’s 10-year yield fell two basis points to 1.98%

  • Britain’s 10-year yield fell two basis points to 3.12%

Commodities

  • Brent crude was little changed

  • Spot gold fell 0.3% to $1,769.34 an ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Richard Henderson.

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