(Bloomberg) — Stock and bond markets have stabilized after last week’s blockbuster rally, with traders still optimistic that U.S. and European central banks could start cutting interest rates as early as next year.
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Europe’s Stoxx 600 index paused after recent gains and U.S. futures gained about 0.2%. Asian markets rallied earlier, with South Korea’s Kospi rising more than 5% after regulators banned short selling. The dollar fell for a fourth day. Crude oil futures rose more than 1.5% after Saudi Arabia and Russia reiterated they will stick to their supply curbs through the end of the year.
Global stock markets are finding firmer footing after recent U.S. data suggested a slowing economy, prompting traders to price in lower interest rates through June. Ten-year Treasury yields, the benchmark rate for the global cost of capital, rose slightly on Monday after slipping in recent weeks from 16-year highs reached last month.
“A better-than-expected U.S. earnings season and the peak in interest rates all point to a year-end rally,” said Leonardo Pellandini, equity strategist at Bank Julius Baer in Zurich.
Read more: BlackRock’s Boivin says high interest rates still pose threat to stock rally
More information on how policymakers view inflation’s trajectory could be revealed later in the week, with speeches from Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey due.
“There is another reason for investors to be more optimistic that the Fed is probably done with rate hikes, but there should be no let-up,” Vasu Menon, managing director of investment strategy at OCBC Bank Singapore, said on Bloomberg Television. “If the economy proves more resilient, if inflation proves more stubborn, bond yields could rise again.”
The story goes on
According to Morgan Stanley’s Michael Wilson, last week’s market rally was more of a bear market rally than the start of a sustained upswing, especially given a gloomy earnings outlook and weaker macro data.
Among individual stock market players, Ryanair Holdings Plc rose nearly 7% after announcing its first regular dividend. Tesla Inc. rose in premarket trading after Portal reported that the company would produce a new, cheaper electric car model in Germany.
Important events this week:
Eurozone Services PMI, Monday
Interest rate decision for Australia, Tuesday
China trade data, Tuesday
US trade balance, Tuesday
Dallas Fed President Lorie Logan speaks Tuesday
Germany CPI, Wednesday
Bank of England Governor Andrew Bailey speaks on Wednesday
China PPI, CPI, Thursday
Initial jobless claims in the US, Thursday
Fed Chairman Jerome Powell speaks on Thursday
US consumer confidence, Friday
British industrial production, GDP, Friday
Some of the key moves in the markets:
Shares
The Stoxx Europe 600 fell 0.1% at 10:58 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures rose 0.3%
The futures on the Dow Jones Industrial Average hardly changed
The MSCI Asia Pacific Index rose 2%
The MSCI Emerging Markets Index rose 2.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.0749
The Japanese yen fell 0.2% to 149.65 per dollar
The offshore yuan rose 0.2% to 7.2769 per dollar
The British pound rose 0.3% to $1.2416
Cryptocurrencies
Bitcoin rose 1.5% to $35,185.08
Ether rose 1.4% to $1,896.38
Tie up
The 10-year Treasury yield rose two basis points to 4.59%
The 10-year German government bond yield rose six basis points to 2.70%
The 10-year UK government bond yield rose five basis points to 4.34%
raw materials
Brent crude rose 1.6% to $86.26 a barrel
Spot gold fell 0.3% to $1,987.50 an ounce
This story was produced with support from Bloomberg Automation.
– With support from Richard Henderson, Alex Nicholson and Alice Gledhill.
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