Stocks, Bonds Rally as Peak-Rate Wagers Surge: Markets Wrap

(Bloomberg) — A rally in global markets extended into a second day, lifting U.S. index futures and European shares as investors bet central banks can slow the pace of tightening monetary

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S&P 500 and Nasdaq 100 futures each rose at least 1.2% after the underlying indexes posted a strong start to the quarter on Monday. Europe’s Stoxx 600 gauge rose for a third day. The Australian dollar fell briefly after policymakers raised interest rates by less than expected. Oil advanced on expectations that the OPEC+ alliance will deliver a substantial supply cut. The dollar and Treasury yields fell for a second day.

Investors see weaker-than-expected U.S. manufacturing data supporting a dovish stance by the Federal Reserve after 3 percentage points of hikes began to weigh on the economy. Money markets now see the Fed funds rate peaking below 4.5% in March. Speculation is growing that the global wave of disruptive monetary tightening is nearing its end, after the Reserve Bank of Australia raised rates by half of what was expected.

“While the more rational approach outlined by the RBA does not advance rate cuts, it offers the possibility of a step back from the more extreme hawkishness of recent weeks,” wrote Stephen Innes, managing partner at SPI Asset Management, in a note. “This implies a bullish surge in bond markets and should support equity markets if other central banks do.”

Money markets indicate the Fed will raise rates by a maximum of 125 basis points in March, compared with 165 basis points seen after the third three-quarter point hike last month. Those lowered expectations spurred a rally in Treasuries across the curve on Tuesday. The 10-year rate fell 6 basis points on Tuesday, while the two-year yield fell twice as many basis points, falling below the 4% mark.

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Still, Fed speakers kept up the pace of rate hikes. New York Fed President John Williams said this week that the U.S. central bank has not yet raised interest rates to levels that would constrain economic growth and that tightening still has a “significant way to go.” to go around

The dollar headed for its lowest level since September 22, with a rebounding British pound acting as a major drag. Britain’s withdrawal from a tax cut plan calmed nerves about the government’s fiscal health, although doubts about the currency’s outlook persisted.

West Texas Intermediate rose to $84 a barrel after rallying more than 5% on Monday. The Organization of the Petroleum Exporting Countries and its allies, including Russia, will consider cutting output by more than 1 million barrels a day when they meet on Wednesday, delegates said.

The MSCI Asia Pacific index rallied more than 2% to hit a one-week high, driven by a broad rally in the region. Japan’s Topix stock benchmark rose more than 3%, boosted by technology stocks.

China’s onshore markets will be closed this week for a holiday, while the Hong Kong exchange is closed on Tuesday for the Chung Yeung Festival.

Key events this week:

• Euro zone PPI, Tuesday

• US factory orders, durable goods, Tuesday

• The Fed’s John Williams, Lorie Logan, Loretta Mester and Mary Daly speak at the events on Tuesday

• Eurozone services PMI, Wednesday

• The OPEC+ meeting starts on Wednesday

• Raphael Bostic of the Fed speaks, Wednesday

• The Reserve Bank of New Zealand meets on Wednesday

• Eurozone retail sales, Thursday

• Initial US jobless claims on Thursday

• The Fed’s Charles Evans, Lisa Cook and Loretta Mester speak at events Thursday

• US Unemployment, Wholesale Inventories, Non-Farm Payrolls, Friday

• BOE Deputy Governor Dave Ramsden speaks at the event on Friday

• The Fed’s John Williams speaks at the event on Friday

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Some of the main movements in the markets:

stocks

• The Stoxx Europe 600 was up 1.2% at 8:07 a.m. London time

• S&P 500 futures rose 1.2%

• Nasdaq 100 futures rose 1.5%

• Dow Jones Industrial Average futures rose 1.1%

• The MSCI Asia Pacific index rose 2.3%

• The MSCI Emerging Markets index rose 1.5%

coins

• The Bloomberg Dollar Spot Index fell 0.4%

• The euro rose 0.5% to $0.9880

• The Japanese yen fell 0.1% to 144.71 per dollar

• The offshore yuan rose 0.7% to 7.0527 per dollar

• The British pound rose 0.6% to $1.1386

Cryptocurrencies

• Bitcoin rose 1.5% to $19,894.1

• Ether rose 1.3% to $1,340.63

good ones

• The 10-year Treasury yield fell four basis points to 3.60%

• Germany’s 10-year yield fell four basis points to 1.88%

• UK 10-year yield fell three basis points to 3.93%

Merchandise

• Brent crude rose 0.9% to $89.67 a barrel

• Spot gold rose 0.4% to $1,707.41 an ounce

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