Futures rise with European stocks as all eyes are on the Fed: Markets end

This content was published on January 26, 2022 – 10:22

(Bloomberg) – U.S. stock futures rose along with European stocks on Wednesday ahead of a Federal Reserve decision in which officials are expected to signal plans for policy tightening.

European stocks rose, with travel shares and miners rising the most. Contracts on US gauges also climbed, led by those on the Nasdaq 100, signaling a rebound for tech stocks. Microsoft Corp. and Texas Instruments Inc. won in premarket trading after providing an upbeat outlook. An Asia-Pacific gauge is lowered.

Markets were volatile ahead of the Fed’s decision, with tensions between Russia and the United States adding to investor concerns. Traders are waiting to see how hawkish the central bank looks in its fight to tame inflation – both on expected interest rate hikes from March and subsequent cuts to its holdings of Treasuries. .

Still, there are signs of easing the unrest. The Cboe volatility index known as the VIX fell from a one-year high, snapping six days of gains.

The benchmark 10-year US Treasury yield rose, while the dollar gauge was little changed.

“We expect inflation to remain high and interest rates to rise more than investors expect today,” said Norbert Frey, head of portfolio management at Fuerst Fugger Privatbank. “A rising interest rate environment is driving a reassessment of all business models and we believe 2022 can be a year of value stocks.”

Global stocks fell around 7% in January, on track for the worst month since the pandemic rocked markets in 2020. Some strategists are optimistic about the outlook after the declines.

Goldman and Citi strategists say now is the time to buy Rout stocks

“The growth-policy trade-off may be less favourable, but we think a lot of bad news is now priced in,” Emmanuel Cau, head of European equity strategy at Barclays Plc, wrote in a note. “Early stages of policy normalization typically bring higher volatility but rarely end bull markets, although higher than usual P/E multiples mean equities are more rate sensitive this time around.”

Meanwhile, Bitcoin extended its gains for the week, heading towards $38,000. Crude held above $85 a barrel after industry estimates showed a drop in U.S. inventories and investors followed tensions around Ukraine for signs that the conflict could disrupt supplies.

US President Joe Biden has said he would consider personally sanctioning Vladimir Putin if he orders an invasion of Ukraine, stepping up efforts to deter the Russian leader from war.

Elsewhere, Japanese stocks fell, while China’s CSI 300 narrowly avoided a bear market after state media called on investors to calm down.

Here are some additional views on the Fed:

  • “For the Fed, the current decline in risk assets certainly makes their job more difficult, but we don’t think the level of tightening in financial conditions lives up to a dovish message,” wrote Ed Acton, strategist at Citigroup Inc., in a note. “Instead, the FOMC could seek to highlight current inflation risks as a ‘constraint’ on monetary policy going forward.”
  • “They could end QE a month earlier” in February compared to March, Kelsey Berro, bond portfolio manager at JPMorgan Asset Management, told Bloomberg Television, referring to quantitative easing. “It would only reinforce that we expect the first rate hike in March and then quarterly rate hikes thereafter.”
  • “A moderately hawkish Powell would be dovish on the market,” wrote Steven Englander, global head of G-10 FX research at Standard Chartered Bank, in a note. “If Powell is saying the FOMC is committed to getting inflation back on track and still hoping that a few hikes combined with some QT will suffice, that’s accommodating to market prices,” he said. declared, referring to quantitative tightening.

What to watch this week:

  • Fed and Bank of Canada monetary policy decisions on Wednesday.
  • EIA Crude Oil Inventory Report Wednesday.
  • US New Home Sales, Wholesale Inventory Wednesday.
  • Reserve Bank of South Africa rate decision on Thursday.
  • US Initial Jobless Claims, Durable Goods, GDP Thursday.
  • Eurozone economic confidence, consumer confidence on Friday.
  • US Consumer Income, University of Michigan Consumer Sentiment Friday.

For more market analysis, read our MLIV blog.

Some of the major movements in the markets:

Shares

  • S&P 500 futures rose 1.1% at 5:21 a.m. PT
  • Nasdaq 100 futures rose 1.8%
  • Dow Jones Industrial Average futures rose 0.8%
  • The Stoxx Europe 600 is up 2%
  • The MSCI World index rose 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro fell 0.2% to $1.1281
  • The pound was little changed at $1.3503
  • The Japanese yen fell 0.3% to 114.17 per dollar

Obligations

  • The yield on 10-year Treasury bills rose one basis point to 1.78%
  • Germany’s 10-year yield was little changed at -0.08%
  • The UK 10-year yield rose two basis points to 1.18%

Merchandise

  • West Texas Intermediate crude rose 0.6% to $86.08 a barrel
  • Gold futures fell 0.3% to $1,849.50 an ounce

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Mary I. Bruner