(Bloomberg Opinion) — European stocks rose and U.S. stock futures fluctuated as investors watched Federal Reserve Chairman Jerome Powell’s comments to be released later that may shape views on the path of central bank rates.
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The Stoxx Europe 600 was slightly higher as energy stocks outperformed. BP Plc rose more than 4% as the oil major increased its dividend and extended share buybacks after posting record profits for 2022. The S&P 500 and Nasdaq 100 contracts were about 0.1% lower. A gauge of Asian stocks pared gains, still paring losses from the biggest two-day drop in four months.
The dollar steadied after weakening earlier against all members of the Group of 10, while Treasuries recouped some of a two-day slide triggered by traders raising bets on future Federal Reserve tightening. Recent moves have dulled the best start to the year for cross-asset returns since 1987.
Investors are weighing whether Powell can stress that optimism for rate cuts later in 2023 is probably misplaced. Atlanta Fed President Raphael Bostic said Monday that strong jobs data on Friday raises the possibility that the central bank needs to raise interest rates to a higher peak than policymakers had expected. previously.
Powell may reiterate some of the points he made even before the latest jobs report, which justified the Fed’s rate hikes last year, according to Jack McIntyre, a portfolio manager at Brandywine Global Investment Management LLC. “I hope Powell will stress that they have done a lot and that there will be a tightening that will hit the economy later this year,” he said on Bloomberg Television.
Citigroup sees the strength of the dollar as a key risk for the stock markets. “The view is that it’s going to be a tough six to eight months for equity markets globally, not just in Asia,” Mohammed Apabhai, head of Asia-Pacific trade strategy at Citigroup, said on Bloomberg Television. “But if the dollar goes back to anything more than what we’re projecting, emerging markets will be punished.”
The yen gained after Japan unexpectedly reported nominal wages rose by the largest margin in nearly 26 years in December, stoking market bets that the central bank will either tighten or back away from its stimulus program under a new governor.
Some of the strongest gains in Asian stock trading on Tuesday came in Hong Kong-listed technology stocks, in stark contrast to the slide on Wall Street on Monday. Baidu Inc. is up as much as 18% after claiming it will launch a bot similar to ChatGPT in March.
In India, shares of Adani Group rose, stemming a slide that began when US short seller Hindenburg Research made fraud allegations against the conglomerate. The Group’s flagship Adani Enterprises Ltd. gained as much as 25% in Tuesday trading as the Adani family’s decision to prepay $1.11 billion in loans allays some investor fears.
The air of caution in global markets is also reinforced by geopolitical concerns. The US is preparing to slap a 200% tariff on Russian-made aluminum, while the US has started to take back some parts of the Chinese balloon that a fighter jet shot down off the coast of South Carolina. Biden administration officials said the United States was still trying to find out how much senior leaders in Beijing knew about the alleged spying mission.
Elsewhere, oil rose for a second session after Saudi Arabia unexpectedly raised crude prices in Asia, indicating confidence in the demand outlook. Gold rose higher.
Read: Bond Traders Quickly Approaching Fed Rate Spike Opinion
Key events:
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US trade, Tuesday
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Fed Chairman Jerome Powell was interviewed by David Rubinstein at the Economic Club of Washington on Tuesday.
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President Joe Biden delivers the State of the Union address to Congress on Tuesday
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US Wholesale Inventories, Wednesday
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New York Fed President John Williams is interviewed at the Wall Street Journal live event on Wednesday
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Initial jobless claims in the US, Thursday
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ECB President Christine Lagarde takes part in the EU leaders’ summit on Thursday
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Bank of England Governor Andrew Bailey appears before the Treasury Committee on Thursday.
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US University of Michigan Consumer Sentiment, Friday
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Fed’s Christopher Waller and Patrick Harker speak Friday
Some of the main movements in the markets:
Stocks
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The Stoxx Europe 600 was up 0.2% at 8:23am London time
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S&P 500 futures were little changed
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Nasdaq 100 futures fell 0.1%
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Dow Jones Industrial Average futures fell 0.1%
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The MSCI Asia Pacific Index rose 0.3%
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The MSCI Emerging Markets Index was little changed
coins
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The Bloomberg Dollar Spot Index was little changed
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The euro fell 0.1% to $1.0712
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The Japanese yen rose 0.3% to 132.21 per dollar
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The offshore yuan rose 0.1% to 6.7975 per dollar
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The British pound fell 0.1% to $1.2002
CRYPTOCURRENCIES
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Bitcoin fell 0.1% to $22,886.94
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Ether fell 0.5% to $1,630.58
Captivity
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The 10-year Treasury yield was little changed at 3.63%
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Germany’s 10-year yield rose two basis points to 2.32%
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The UK 10-year yield rose one basis point to 3.25%.
raw Materials
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Brent crude rose 2% to $82.61 a barrel
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Spot gold rose 0.3% to $1,873.64 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott, Matthew Burgess, and Tony Jordan.
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