US Equity Futures Edge Higher as Dollar Steadies: Markets Wrap

US Equity Futures Edge Higher as Dollar Steadies: Markets Wrap
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Brett Miller and Cecile Gutscher
·3 min read
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  • Jerome Powell
    American banker

(Bloomberg) -- US stock futures ticked up Tuesday as investors avoided large bets before the two-day testimony of Fed Chair Jerome Powell and Friday’s monthly payrolls data.

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Contracts on the S&P 500 pointed to a bounce after the underlying gauge closed flat Monday, having erased a gain of as much as 0.8%. European equities fluctuated after a surprise increase in German factory orders bolstered the case for hawkish European Central Bank policy. The greenback was steady.

Many investors are sidelined after being burnt repeatedly betting on an inflation peak, cooling US economy and Fed policy pivot. Their absence has highlighted the activity of trend-following quants who helped stocks chalk up their best week in a month.

Read more: Fast-Money Quants Are Buying Stocks as Human Traders Stay Put

Commodity Trading Advisors bought $12 billion of equities on Thursday and Friday, per Nomura Holdings Inc., helping the S&P 500 bounce away from a technical danger zone. CTAs may purchase an additional $80 billion if global stock benchmarks rally some 2%, according to the firm. The exposure of systematic investors last month overtook discretionary funds for the first time in almost 18 months, according to Deutsche Bank AG data.

The testimony of the Fed Chair before Friday’s jobs report will set the tone for markets this week. He’ll have the chance of telegraphing how much more policy tightening he thinks is needed, ahead of the next US rates decision on March 22. Powell will face Congress twice this week, beginning later Tuesday.

Treasuries remained subdued with the yield on 10-year US government debt just below the closely watched 4% level.

Traders have recently ramped up their interest-rate expectations higher on signs of hot inflation and a tight labor market, spurring some Fed officials to ponder the merits of a fresh 50-basis-point hike in the March meeting.

The aggressive repricing is one reason why Christopher Harvey, head of equity strategy at Wells Fargo, sees a case for equity resilience at least in the short term.

“We wanted to take the other side of lower stock prices and more hawkish Fed Fund expectations because only a small change in perceptions would likely pop equities,” said Harvey. “We believe there’s more near-term upside.”

Key events this week:

  • US wholesale inventories, consumer credit, Tuesday

  • Fed Powell’s semiannual Monetary Policy Report to the Senate Banking Committee, Tuesday

  • Euro area GDP, Wednesday

  • US MBA mortgage applications, ADP employment change, trade balance, JOLTS job openings, Wednesday

  • Fed Chair Powell’s semiannual Monetary Policy Report to the House Financial Services Committee, Wednesday

  • Canada rate decision, Wednesday

  • EIA crude oil inventories, Wednesday

  • China CPI, PPI, Thursday

  • US Challenger job cuts, initial jobless claims, household change in net worth, Thursday

  • Bank of Japan policy rate decision, Friday

  • US nonfarm payrolls, unemployment rate, monthly budget statement, Friday

Some of the main moves in markets :

Stocks

  • The Stoxx Europe 600 was little changed as of 8:25 a.m. London time

  • S&P 500 futures rose 0.2%

  • Nasdaq 100 futures rose 0.2%

  • Futures on the Dow Jones Industrial Average were little changed

  • The MSCI Asia Pacific Index was little changed

  • The MSCI Emerging Markets Index fell 0.2%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0672

  • The Japanese yen was little changed at 135.81 per dollar

  • The offshore yuan rose 0.2% to 6.9357 per dollar

  • The British pound was little changed at $1.2019

Cryptocurrencies

  • Bitcoin was little changed at $22,414.84

  • Ether rose 0.2% to $1,569.72

Bonds

  • The yield on 10-year Treasuries was little changed at 3.95%

  • Germany’s 10-year yield declined four basis points to 2.71%

  • Britain’s 10-year yield declined three basis points to 3.84%

Commodities

  • Brent crude was little changed

  • Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Denitsa Tsekova.

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