Big Banks Lead Gains in Stocks; Treasuries Retreat: Markets Wrap

Stocks rose after President Joe Biden signaled he’d reconsider China tariffs imposed by the Trump administration. The dollar and bonds fell.

Big banks led gains in the S&P 500 after JPMorgan Chase & Co.’s chief Jamie Dimon said “storm clouds” over the US economy may dissipate. The euro climbed after European Central Bank Chief Christine Lagarde said higher interest rates are coming in July.

“The markets have been due for a rally for quite some time,” wrote Paul Nolte, portfolio manager at Kingsview Investment Management. “It is not likely to mean the end of the decline that began at the start of the year, but a respite from the persistent selling of the past two months.”

Separately, Biden said the US military would intervene to defend Taiwan in any attack from China, comments that appeared to break from the longstanding policy of “strategic ambiguity” before they were walked back by White House officials. Meanwhile, his administration announced that a dozen Indo-Pacific countries will join the US in a sweeping economic initiative designed to counter China’s influence in the region.

Russia’s blockade of Ukraine’s ports is a “declaration of war” that threatens to trigger mass migration and a global food crisis, a United Nations official said, adding to the dire warnings on the opening day of the World Economic Forum in Davos. A diplomat at Russia’s UN mission in Geneva has resigned in protest at President Vladimir Putin’s invasion of Ukraine, becoming the first envoy to publicly criticize the war.

Equities have been volatile as investors assess the impact of China’s Covid policies and monetary tightening on the outlook for the world’s largest economies. Beijing reported a record number of cases, reviving concerns about a lockdown, and adopted multiple measures to further stabilize the economy.

Minutes of the most recent Federal Reserve rate-setting meeting will give markets insight this week into the US central bank’s tightening path. St. Louis Fed President James Bullard said the central bank should front-load an aggressive series of rate hikes to push rates to 3.5% at year’s end, which if successful would push down inflation and could lead to easing in 2023 or 2024.

“The macro backdrop remains challenging, but a lot of bad news has been absorbed. We are probably approaching a near-term bottom in risk assets,” Barclays Plc strategist Ajay Rajadhyaksha wrote in a note.

Here are some key events to watch this week:

• Eurozone S&P Global PMIs Tuesday
• US new home sales, S&P Global PMIs Tuesday
• Reserve Bank of New Zealand rate decision Wednesday
• FOMC minutes Wednesday
• ECB publishes its Financial Stability Review Wednesday
• Bank of Korea rate decision Thursday
• US GDP, initial jobless claims Thursday
• US core PCE price index; personal income and spending; wholesale inventories; University of Michigan consumer sentiment Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.7% as of 10:15 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average rose 1.2%
• The Stoxx Europe 600 rose 0.8%
• The MSCI World index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.6%
• The euro rose 0.9% to $1.0659
• The British pound rose 0.8% to $1.2578
• The Japanese yen rose 0.2% to 127.60 per dollar

Bonds

• The yield on 10-year Treasuries advanced four basis points to 2.82%
• Germany’s 10-year yield advanced three basis points to 0.98%
• Britain’s 10-year yield advanced six basis points to 1.95%

Commodities

• West Texas Intermediate crude fell 0.5% to $109.71 a barrel
• Gold futures rose 0.6% to $1,860 an ounce

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