Stocks Pause After Rally, Seek Rate-Cut Signals: Markets Wrap

Tassia Sipahutar and Sujata Rao
·4 min read
Stocks Pause After Rally, Seek Rate-Cut Signals: Markets Wrap

(Bloomberg) -- European shares paused around a record high after six weeks of gains, as investors waited for reassurance that central banks are on track to cut interest rates in the coming months.

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The pan-European Stoxx 600 gauge rose 0.1%, though the tech shares subindex outperformed, tracking Friday’s Wall Street tech rally. Treasury yields edged up, while oil prices steadied near the highest level this year after OPEC+ extended its production cuts.

Earlier in Asia, the world’s top chipmaker Taiwan Semiconductor Manufacturing Co. rose to its highest-ever level and Japan’s Nikkei-225 index surpassed 40,000 for the first time. US stock futures held around flat, after the S&P 500 notched its 15th record high Friday, led by megacap tech shares such as Nvidia Corp. and Advanced Micro Devices Inc.

The US personal consumption expenditures index last week reinforced bets the Federal Reserve would be able to cut rates later this year, while the latest earnings season showed companies averaging 8% earnings growth.

“Better economic outlook, bullish investor sentiment and some better earnings have supported the equity markets,” Jefferies strategist Mohit Kumar wrote in a note. “Whether it’s the economic outlook or the central bank ‘put’ being back on the table, investors are very positive on risky assets.”

While markets have broadly pushed policy-easing expectations to July, from the previously anticipated May, Kumar still expects 75-100 basis points worth of rate cuts this year from the Fed.

Some hints could come this week from Fed Chair Jerome Powell’s congressional testimony, while the European Central Bank will hold a policy meeting on Thursday. A raft of economic data is also due, including US monthly payrolls figures on Friday.

Elsewhere, Chinese stocks eked out meager gains as traders waited for the 14th National People’s Congress, an annual parliamentary gathering that will begin Tuesday and could produce more stimulus measures to shore up the economy.

Potential policy support from the NPC, alongside likely 8-10% earnings growth, meant there was “a pretty good setup for the market to do better in the next 10-12 months,” Kinger Lau, a strategist at Goldman Sachs Group Inc., said on Bloomberg Television.

Elsewhere, Bitcoin toppped $65,000 level, leading traders to bet the cryptocurrency will surpass the record price of almost $69,000, hit during the pandemic.

Key events this week:

  • ECB Governing Council member Robert Holzmann speaks, Monday

  • Fed’s Patrick Harker speaks, Monday

  • Japan’s Tokyo CPI, Tuesday

  • BOJ Governor Kazuo Ueda speaks, Tuesday

  • China Caixin services PMI, Tuesday

  • China kicks off its 14th National People’s Congress, Tuesday

  • Eurozone S&P Global Services PMI, PPI, Tuesday

  • US factory orders, ISM services, S&P Global Services PMI, Tuesday

  • More than a dozen US states hold Republican and Democratic primaries, Tuesday

  • Australia GDP, Wednesday

  • UK Chancellor Jeremy Hunt unveils annual budget, Wednesday

  • Eurozone retail sales, Wednesday

  • Fed Chair Jerome Powell testifies before House committee, Wednesday

  • Fed issues Beige Book survey of regional economic conditions, Wednesday

  • Fed’s Neel Kashkari, Mary Daly speak, Wednesday

  • China trade, forex reserves, Thursday

  • BOJ board member Junko Nakagawa speaks, Thursday

  • ECB rate decision, Thursday

  • US initial jobless claims, trade, Thursday

  • Fed Chair Jerome Powell testifies before Senate committee, Thursday

  • Fed’s Loretta Mester speaks, Thursday

  • US President Joe Biden delivers the State of the Union address, Thursday

  • Eurozone GDP, Friday

  • US nonfarm payrolls, unemployment, Friday

  • Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 was little changed as of 8:46 a.m. London time

  • S&P 500 futures were little changed

  • Nasdaq 100 futures rose 0.1%

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The MSCI Asia Pacific Index rose 0.4%

  • The MSCI Emerging Markets Index rose 0.7%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0840

  • The Japanese yen fell 0.1% to 150.33 per dollar

  • The offshore yuan was little changed at 7.2109 per dollar

  • The British pound rose 0.1% to $1.2669

Cryptocurrencies

  • Bitcoin rose 3.9% to $65,288.65

  • Ether rose 1.6% to $3,533.63

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.21%

  • Germany’s 10-year yield was little changed at 2.41%

  • Britain’s 10-year yield was little changed at 4.12%

Commodities

  • Brent crude rose 0.4% to $83.92 a barrel

  • Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Aya Wagatsuma and Winnie Hsu.

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