(Bloomberg) — Stocks extended gains as investors welcomed weaker-than-expected inflation readings in the United States and the United Kingdom as evidence that central banks may be done with their aggressive interest rate hikes.
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Europe’s Stoxx 600 index rose 0.5% and contracts on the S&P 500 gained 0.3%. 10-year Treasury yields stabilized while the dollar was little changed after yesterday’s sharp decline.
Markets now await Wednesday’s U.S. retail sales and producer price data, as well as Target Corp.’s results, for further confirmation that an economic slowdown will allow the Federal Reserve to end monetary tightening. Fed swaps suggest the likelihood of another rate hike has fallen to near zero – with the market pricing in a 50 basis point rate cut by July.
“When the Fed is done raising rates, there’s a sense of relief out there that this big headwind to market appreciation will go away,” said Matt Stucky, chief equity portfolio manager at Northwestern Mutual Wealth Management Co.
However, if upcoming data, including retail sales, signal only a gradual economic slowdown, “we will likely see the Fed continue to pause,” he added.
London’s FTSE 100 index rose 0.8% and the pound fell after U.K. inflation slowed more than expected, a similar result to U.S. prices on Tuesday. This news reinforced optimism that the Bank of England has also finished raising interest rates.
Infineon Technologies AG rose about 7% after the German chipmaker forecast higher sales on the strength of its automotive business. French train maker Alstom SA slumped 17% after announcing a plan to cut jobs and sell assets.
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In Asia, the MSCI index of the region’s stocks rose more than 2% as China stepped up economic support. The People’s Bank of China has pumped the largest amount of cash into the banking system since 2016, providing 1.45 trillion yuan ($200 billion) in cash through its medium-term credit facility.
Iron ore futures in Singapore hit $130 a tonne for the first time since March as the demand outlook for steel in China improved. That boosted European mining stocks, giving the industry a 2% rise and the biggest gain on the Stoxx 600.
Important events this week:
US Retail Sales, Corporate Inventories, PPI, Empire Manufacturing, Wednesday
Target result, Wednesday
Prices for new houses in China, Thursday
US initial jobless claims, industrial production, Thursday
Walmart earnings, Thursday
US President Joe Biden and Chinese President Xi Jinping are expected to speak at the APEC summit on Thursday
Cleveland Fed President Loretta Mester, New York Fed President John Williams and Fed Vice Chairman for Supervision Michael Barr speak Thursday
Bank of England Deputy Governor Dave Ramsden and ECB President Christine Lagarde speak at Thursday’s event
US housing construction begins on Friday
The U.S. Congress faces a midnight deadline Friday to pass a federal spending measure
ECB President Christine Lagarde speaks on Friday
Chicago Fed President Austan Goolsbee, Boston Fed President Susan Collins and San Francisco Fed President Mary Daly speak Friday
Some of the key moves in the markets:
Shares
S&P 500 futures rose 0.3% at 5:54 a.m. New York time
Nasdaq 100 futures rose 0.5%
Futures on the Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 rose 0.6%
The MSCI World Index rose 0.5%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.0857
The British pound fell 0.3% to $1.2461
The Japanese yen was little changed at 150.46 per dollar
Cryptocurrencies
Bitcoin rose 0.8% to $35,875.96
Ether rose 0.3% to $1,988.71
Tie up
The 10-year Treasury yield rose two basis points to 4.47%
The yield on 10-year German government bonds has hardly changed at 2.60%
The 10-year UK government bond yield rose two basis points to 4.17%
raw materials
West Texas Intermediate crude fell 0.4% to $77.89 a barrel
Spot gold rose 0.5% to $1,973.14 an ounce
This story was produced with support from Bloomberg Automation.
– With support from Tassia Sipahutar and Winnie Hsu.
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