US, Europe Futures Edge Up Before Rate Decisions: Markets Wrap

(Bloomberg) — US and European equity futures climbed while Asian stocks were mixed as investors awaited interest rate decisions this week from the US, Europe, China and Japan. A gauge of dollar strength was steady and Treasury yields were marginally higher.

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Futures for Euro Stoxx 50 advanced 0.3% and contracts for the S&P 500 added 0.1% after the underlying index crept further into bull-market territory on Friday. Japan’s Topix index rose 0.6% while Hong Kong’s benchmark swung between gains and losses. Markets in Australia were closed for a holiday.

Technology shares have continued to climb in the US amid bets the Federal Reserve is nearing the end of its hiking cycle. Positioning in rates markets suggests one more Fed hike, with the likelihood that the move comes next month rather than this Wednesday.

Treasury yields rose around two basis points for both the two-year and the 10-year maturities. A Bloomberg measure of the dollar was steady. The yen and the offshore yuan slipped about 0.1% versus the greenback.

“The main focus this coming week will be on the US core CPI and thereafter the FOMC, where our economics team expects a ‘hawkish pause’ from the Fed,” Nomura Holdings Inc. analysts including Chetan Seth wrote in a note. With the market mostly pricing in a hike by July, they don’t see a negative impact for stocks beyond “any initial knee-jerk negative reaction.”

While the consensus is for the Fed to pause this week, there is also concern that its ten hikes in the current cycle have done damage, and this has bond managers including Fidelity International to Allianz Global Investors forecasting an economic downturn.

Unexpected hikes last week from the Bank of Canada and the Reserve Bank of Australia have added an extra element of uncertainty to markets. The European Central Bank is projected to lift its benchmark rate Thursday and the Bank of Japan is expected to stand pat on Friday.

Concerns over growth in China also remain.

“The Chinese economy is really a story of a crisis of confidence right now,” Meera Pandit, global market strategist at JPMorgan Asset Management, said on Bloomberg Radio. “We really need to see lawmakers and then policymakers infuse some sort of fiscal stimulus to help that confidence story.”

Bloomberg Economics is among a minority of forecasters that see the People’s Bank of China cutting its medium-term lending facility on Thursday.

Elsewhere, oil extended losses amid persistent concerns around the demand outlook as Goldman Sachs Group Inc. cut its price forecast again. Brent traded below $75 a barrel and West Texas Intermediate was below $70. Gold fell slightly.

Key events this week:

US CPI, Tuesday
FOMC begins two-day meeting, Tuesday
Eurozone industrial production, Wednesday
US PPI, Wednesday
FOMC rate decision, Wednesday
IEA oil market report released, Wednesday
China central bank meeting to decide on one-year policy loan rate, Thursday
China property prices, retail sales, industrial production, Thursday
ECB rate decision, Thursday
US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production
Eurozone CPI, Friday
Japan BOJ rate decision, Friday
US University of Michigan consumer sentiment, Friday

Some of the major moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 6:50 a.m. London time. The S&P 500 rose 0.1% Friday
Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 0.3% Friday
Euro Stoxx 50 futures rose 0.3%
Japan’s Topix index rose 0.6%
Hong Kong’s Hang Seng Index was little changed
China’s Shanghai Composite Index was little changed