(Bloomberg) — Shares edged higher after last week’s rally amid optimism central-bank interest rates are near their peak. Crude oil climbed 1%.
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European equities advanced 0.3% and US equity futures were little changed after the S&P 500 advanced almost 6% last week. Oil climbed after Saudi Arabia and Russia reaffirmed they will stick with supply curbs of more than 1 million barrels a day through year-end.
The dollar fell against most of its Group-of-10 peers with Bloomberg’s gauge of the US currency slipping for a fourth session. Policy-sensitive US two-year yields edged up four basis pints after sliding 15 basis points Friday, in a sign of shifting rate expectations.
Investors have brought forward their forecasts for Fed rate cuts next year, and have now fully priced in a reduction by June, according to swaps pricing. The increase in dovish bets was partly driven by Friday’s weaker-than-expected US payrolls report and a small increase in unemployment.
“There’s a bit more reason for investors to be more optimistic that the Fed is probably done with rate hikes, but one should not let one’s guard down,” Vasu Menon, managing director for investment strategy for OCBC Bank Singapore, said on Bloomberg Television. “If the economy proves to be more resilient, if inflation proves to be more stubborn, bond yields could go up once again.”
Forecasts for Fed easing next year are at odds with the so-called higher-for-longer narrative policymakers have outlined in recent months, setting the market, and Fed officials, on a collision course.
Last week’s market bounce was more of a bear market rally than the start of a sustained upswing, particularly in light of weaker earnings revisions and macro data, according to Morgan Stanley’s Michael Wilson. Technical and fundamental support for stock gains is missing, with earnings revisions breadth and performance breadth deteriorating significantly over past two months, he said.
In Asia MSCI’s benchmark stocks gauge for the region climbed for a fourth day, heading for its highest close since September. South Korea’s Kospi jumped as much as 4.4%, following Sunday’s news the country would ban short selling until the end of June. Chinese technology and property developers also rose.
Gold slipped after rallying Friday on optimism the Fed can avoid implementing further monetary tightening.
Key events this week:
Eurozone services PMI, Monday
Australia interest rate decision, Tuesday
China trade data, Tuesday
US trade balance, Tuesday
Dallas Fed President Lorie Logan speaks, Tuesday
Germany CPI, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
China PPI, CPI, Thursday
US initial jobless claims, Thursday
Fed Chair Jerome Powell speaks, Thursday
US consumer confidence, Friday
UK industrial production, GDP, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.3% as of 8:02 a.m. London time
S&P 500 futures rose 0.1%
Nasdaq 100 futures rose 0.1%
Futures on the Dow Jones Industrial Average rose 0.1%
The MSCI Asia Pacific Index rose 1.9%
The MSCI Emerging Markets Index rose 2.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro was little changed at $1.0737
The Japanese yen fell 0.2% to 149.67 per dollar
The offshore yuan was little changed at 7.2869 per dollar
The British pound was little changed at $1.2383
Cryptocurrencies
Bitcoin rose 0.7% to $34,938.1
Ether rose 0.6% to $1,880.64
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.59%
Germany’s 10-year yield advanced four basis points to 2.68%
Britain’s 10-year yield advanced four basis points to 4.33%
Commodities
Brent crude rose 0.9% to $85.69 a barrel
Spot gold fell 0.4% to $1,983.84 an ounce
This story was produced with the assistance of Bloomberg Automation.
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