European stocks and US equity futures markets pushed higher early Monday, following Wall Street’s worst week since December that saw traders come to terms with central bank policy that may remain restrictive for longer than thought on both sides of the Atlantic.
The Stoxx 600 Index rose more than 1%, with technology firms and retailers pacing gains and all industry groups in the green. Futures on the tech-heavy Nasdaq 100 and S&P 500 added at least 0.5%. Among single name stocks, Hennes & Mauritz shares jumped as much as 4.2% after Bank of America upgraded its rating. In the US premarket, Seagen Inc. rose about 12% on a report that Pfizer Inc. is in early-stage talks to acquire the cancer therapy developer.
Cheaper valuations are enticing investors back to US stocks, after three straight weeks of declines. A more optimistic outlook for earnings estimates is helping ease fears that inflation will remain entrenched even as growth slows. Investors treading into this market risk falling into a “bull trap” according to Michael Wilson, chief US equity strategist at Morgan Stanley.
“Given our view that the earnings recession is far from over, we think March is a high risk month for the next leg lower in stocks” Wilson wrote in a note Monday.
Stock markets that had mostly shrugged off forecasts for higher interest rates are finally giving way to a swift repricing of yields. Traders are now pricing US rates to peak at 5.4% this year, compared with about 5% just a month ago, as an acceleration in the Federal Reserve’s preferred inflation gauge dashes hopes for an imminent pause in policy tightening.
In Europe, traders are betting the European Central Bank will extend its tightening cycle beyond this year with rates peaking at 3.9% in February 2024.
Elsewhere in markets, oil fell as concerns that the Fed will keep on raising rates eclipsed the latest disruption to supplies in Europe and optimism over a demand recovery in China. Gold was steady.
Iron ore sank following an order by Chinese authorities to cut production in its major steelmaking hub in a bid to curb pollution.
Key events this week:
- US durable goods, Monday
- US wholesale inventories, Conf. Board consumer confidence, Tuesday
- China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI, Wednesday
- Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
- US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
- Eurozone CPI, unemployment, Thursday
- US initial jobless claims, Thursday
- Eurozone S&P Global Eurozone Services PMI, PPI, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 1.1% as of 10:46 a.m. London time
- S&P 500 futures rose 0.5%
- Nasdaq 100 futures rose 0.6%
- Futures on the Dow Jones Industrial Average rose 0.4%
- The MSCI Asia Pacific Index fell 0.5%
- The MSCI Emerging Markets Index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0563
- The Japanese yen rose 0.1% to 136.34 per dollar
- The offshore yuan rose 0.1% to 6.9712 per dollar
- The British pound rose 0.3% to $1.1979
Cryptocurrencies
- Bitcoin fell 0.8% to $23,370.37
- Ether fell 0.4% to $1,635.2
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.96%
- Germany’s 10-year yield advanced three basis points to 2.56%
- Britain’s 10-year yield advanced 13 basis points to 3.79%
Commodities
- Brent crude fell 0.2% to $83.01 a barrel
- Spot gold was a little changed
