Stocks stage small jump as investors weigh cenbanks’ next moves

LONDON, June 20 (Reuters) – Equity markets posted modest gains on Monday after last week’s hefty losses, as investors geared up for a series of U.S. Federal Reserve speakers this week where they could stress the commitment to fight inflation, regardless of the pain of the required rate.

Trading was curtailed for a US holiday.

The euro has seen little movement after French President Emmanuel Macron lost control of the National Assembly on Sunday, a major setback that could send the country into political paralysis. However, yields on French government bonds rose, a sign of nervousness from investors. see More information

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Euro STOXX (.STOXX) rose 0.5%. Germany’s DAX (.GDAXI) gained 0.43%, while French stocks underperformed slightly but were still 0.25% higher (.FCHI) despite Macron’s electoral setbacks.

Holger Schmieding, an economist under Berenberg, said Macron’s party now needs to learn the art of compromise to carry out its policies.

“As most Republicans and other dominant forces in France are less interested in strengthening European integration than Macron, their ability to shape and advance the European agenda will be even more limited than before,” he said.

Nasdaq futures were up 0.78%, while S&P 500 futures were up 0.69%.

The jump in futures markets follows the S&P 500 down nearly 6% last week, trading 24% below its January high.

In Asia, stocks fell on Monday. MSCI’s broader index of Asia Pacific stocks outside Japan (.MIAPJ0000PUS) lost 0.1% and the Tokyo Nikkei (.N225) lost 0.74%.

Chinese blue chips (.CSI300) rose 0.5%, helped by news that President Joe Biden was considering removing some tariffs on China. see More information

The focus on the trajectory of interest rates and inflation is expected to dominate markets this week.

A string of central bank hikes over the past week, including a surprise move by the Swiss National Bank, will be followed by further tightening as policymakers try to tame rising prices – investors predict greater volatility until there is some clarity about a spike in inflation and the central bank tightening policy.

Relief looks unlikely this week, with British inflation figures expected to show another alarmingly high reading that could push the Bank of England to rise at a faster pace.

Several central bankers are also on this week’s speech schedule, led by a likely aggressive testimony from Federal Reserve Chairman Jerome Powell to the US House of Representatives on Wednesday and Thursday.

Expectations of higher US rates rose

“Markets are still digesting the Fed’s higher revaluation of rate expectations, and global risk assets may struggle to show any sustainable recovery for now. will focus on Powell’s testimony,” he said. ING analysts said in a note.

UNCONDITIONAL

Last week, the Fed promised that its commitment to curbing inflation was “unconditional,” while Fed Governor Christopher Waller said on Saturday he would support another 75-basis-point increase in July. see More information

“Financial conditions are set to tighten even further, consumers are experiencing a significant negative sentiment shock, disruptions to energy and food supplies have worsened and the outlook for external growth has deteriorated,” analysts at Nomura warned, saying a mild recession in the fourth quarter is more likely than not.

The dollar had broadly strengthened on the hawkish outlook and the dollar index last traded at 104.37. While it was down 0.3% on the day, it was still not far from last week’s two-decade high of 105,790.

The euro rose 0.3% to $1.0526, helped by investors focusing on European Central Bank tools to combat widening bond spreads among currency bloc members. The single currency, however, was still close to last week’s low at $1.0357.

The yen has been under ample pressure as the Bank of Japan has doggedly adhered to its super-easy policies. It gained slightly against the dollar on Monday to 134.90 yen, having hit its lowest level since 1998 last week.

After massive moves last week, government bond markets were generally calmer.

Bitcoin rebounded from previous losses to trade little changed at $20,580, having jumped sharply over the weekend amid talk of a single major buyer.

Oil prices fell again after a sharp pullback late last week, amid concerns that a global recession would dampen demand.

Brent weakened 0.25% to $112.84, while U.S. crude lost 0.05% to $109.5 a barrel.

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Additional reporting by Wayne Cole in Sydney, edited by Mark Heinrich and Alex Richardson

Our Standards: The Thomson Reuters Trust Principles.

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