(Bloomberg) — Stocks and US equity futures advanced Friday as investors assessed whether monetary tightening to tackle inflation in the US and Europe is getting closer to being priced in. A gauge of dollar strength dropped the most in a month.
Europe’s Stoxx 600 Index jumped more than 1.5% as miners rallied on optimism over Chinese demand, while banks surged following the European Central Bank’s record rate hike. Gains in contracts on the S&P 500 and Nasdaq 100 exceeded 0.8%.
The euro touched the highest level in three weeks after the ECB raised rates 75 basis points Thursday. Bets the Federal Reserve will hike by the same margin when it meets later this month increased after chair Jerome Powell reiterated the Fed is determined to curb price pressures.
European natural gas prices eased as the region’s energy ministers gathered for a summit to draw up plans to fix an unprecedented crisis that threatens to undermine the broader economy.
Treasuries held their retreat overnight, leaving the policy-sensitive two-year yield near the highest since 2007. The Bloomberg Dollar Spot Index slipped as much as 1%, while the pound rallied against the greenback. Oil rose and gold climbed.
Global stocks are on course for their first weekly advance in four, a small measure of respite from the bear-market omens circling markets due to monetary tightening, energy woes and China’s growth slowdown.
“The market has been extraordinarily focused on the actions of the ECB and Fed as they try to bring inflation under control,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “Eventually this will change and the investment horizon will lengthen considerably. For now though, the market has good reasons not to. Inflation saps consumer confidence and overtightening could send the European and US economies into a recession.”
Speaking at a conference, Powell said “we need to act now, forthrightly, strongly as we have been doing” and added that “my colleagues and I are strongly committed to this project and will keep at it.”
In contrast with the buoyant mood in equity markets Friday, Bank of America Corp. strategists flagged that investors are rushing out of US stocks as the likelihood of an economic downturn increases amid a myriad of risks. US stock funds posted outflows of $10.9 billion in the week to Sept. 7, according to EPFR Global data cited by the bank, the biggest exodus in 11 weeks and led by technology stocks.
In Asia, a gauge of regional equities rose the most in two weeks. The yen headed for its best day in a month as Japanese officials gave the strongest hint yet at possible direct market intervention as a response to weakness in the currency.
In commodities, iron ore held above $100 a ton and has this week risen the most since the end of July, as the onset of the peak construction season in China bolstered sentiment. Aluminum extended its rebound from a 17-month low.
The gyrations in markets are being overshadowed Friday by the death of Queen Elizabeth II, whose passing prompted an outpouring of condolences from around the world.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 1.6% as of 10:19 a.m. London time
- Futures on the S&P 500 rose 0.8%
- Futures on the Nasdaq 100 rose 1%
- Futures on the Dow Jones Industrial Average rose 0.7%
- The MSCI Asia Pacific Index rose 1.6%
- The MSCI Emerging Markets Index rose 1.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.9%
- The euro rose 1% to $1.0094
- The Japanese yen rose 1.4% to 142.13 per dollar
- The offshore yuan rose 0.5% to 6.9254 per dollar
- The British pound rose 1% to $1.1621
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.28%
- Germany’s 10-year yield advanced one basis point to 1.73%
- Britain’s 10-year yield declined eight basis points to 3.07%
Commodities
- Brent crude rose 1.7% to $90.65 a barrel
- Spot gold rose 1.1% to $1,728.06 an ounce
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