Quarterly Business Magazine

Stocks, Bonds Climb as Rate-Cut Bets Gather Steam: Markets Wrap

Posted :
Thursday, July 11, 2019

European equities climbed alongside U.S. futures and Asian stocks as investors cheered fresh signs from central bankers that rates are headed lower. Treasuries rose and the dollar fell.

The Stoxx Europe 600 Index headed for the first gain in five days, with energy companies leading the way as crude oil prices surged. U.S. futures climbed after the S&P 500 briefly topped 3,000 for the first time Wednesday on signals that Federal Reserve Chairman Jerome Powell is willing to lower rates, citing a slowing global economy and trade issues. Shares rose across most of Asia with the South Korean and Hong Kong markets outperforming and stocks in China edging higher.

Emerging-market stocks and currencies climbed, while the pound continued its rebound from a two-year low. Yields on 10-year Treasuries and most European government bonds slipped.

This year’s rallies across stocks, bonds and credit got a fresh jolt on Wednesday thanks to comments from Fed Chairman Powell that persuaded investors rates are headed lower by at least a quarter-point in July. Minutes from the central bank’s last meeting further cemented expectations for a cut in borrowing costs. Traders will be eyeing ECB minutes and Powell’s testimony before the Senate Banking Committee on Thursday for further clues.

“There has been a total shift in monetary policy -- quantitative tightening is off the table and we’re back to some mild form of quantitative easing or stable central bank balance sheets,” said Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs. “That’s very supportive for equities.”

Elsewhere, oil extended gains on crude output cuts ahead of a potential hurricane in the Gulf of Mexico.

Here are some key events coming up:

  • Powell testifies to Senate Banking Committee on Thursday.
  • ECB minutes are due on Thursday.
  • A key measure of U.S. inflation -- the core consumer price index, due Thursday -- is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.
  • U.S. producer prices are due on Friday.

Here are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index increased 0.3% as of 10:26 a.m. London time, the highest on record.
  • The Stoxx Europe 600 Index increased 0.3%, the first advance in a week.
  • Germany’s DAX Index increased 0.2%, the first advance in a week.
  • The U.K.’s FTSE 100 Index climbed 0.3%.
  • The MSCI Emerging Market Index jumped 0.7%.
  • The MSCI Asia Pacific Index jumped 0.8%.

Currencies

  • The Bloomberg Dollar Spot Index decreased 0.2%, the lowest in a week.
  • The euro rose 0.2% to $1.1271, the strongest in a week.
  • The British pound gained 0.3% to $1.2539.
  • The Japanese yen increased 0.3% to 108.14 per dollar, the strongest in a week.

Bonds

  • The yield on 10-year Treasuries declined one basis point to 2.05%, the largest decrease in more than a week.
  • Germany’s 10-year yield fell 27 basis points to -0.27%.
  • Britain’s 10-year yield gained 77 basis points to 0.765%.

Commodities

  • West Texas Intermediate crude climbed 0.6% to $60.81 a barrel, reaching the highest in seven weeks.
  • Gold rose 0.3% to $1,423.66 an ounce, the highest in more than six years.
  • Iron ore dipped 1.1% to $113.36 per metric ton

By Laura Curtis

(Bloomberg)

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