Stocks rise as traders pin hopes on inflation data: Markets Wrap

(Bloomberg) — Stocks continued to rally as traders bet on softer U.S. inflationary pressures and economic stimulus from China.

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The risk-on tone drove demand for technology and basic resource stocks in Europe, with Glencore Plc and Rio Tinto Plc leading gains among miners. U.S. benchmark futures climbed after the Nasdaq 100 and S&P 500 closed at their highest levels since April 2022. Investors chasing the stock rally sold bonds, with yields on both two-year Treasuries and British gilts trading near financial crisis highs. The dollar weakened.

Confidence is rising that the latest reading of the US consumer price index on Tuesday will show that pressures have cooled enough to allow Federal Reserve policymakers to pause their tightening campaign on Wednesday. It will mark the first time they have foregone an interest rate increase after 1[ads1]0 consecutive moves in the policy rate since March 2022.

“There’s a pretty clear meltdown of risk, pricing in a Fed pause and potentially softer CPI later today,” said John Velis, a strategist at BNY Mellon. “We think the Fed is done for this entire cycle, as the June break will make it difficult to resume hikes in July.”

Falling energy prices in May should offset increases in other categories to keep the headline index roughly unchanged, according to Anna Wong, Bloomberg’s chief U.S. economist. Excluding food and energy, prices likely rose 0.3% – a slowdown from April’s 0.4% increase, she said.

The market still allows for a possible Fed rate hike next month, with swaps showing a nearly quarter-point further tightening priced in by the July meeting.

Meanwhile, a benchmark of Asian shares rose more than 1% as China was said to be considering broad stimulus measures, partly reported by Bloomberg News earlier this month.

Investor speculation about looming cuts in China’s long-term policy rates also intensified on Tuesday after the central bank unexpectedly lowered its seven-day reverse repo rate.

“The message is mixed: on the one hand, they surprised the market by announcing a cut in short-term interest rates, but on the other, it also shows that the Chinese recovery is really weak,” said Charles-Henry Monchau, chief executive. investment manager at Banque Syz.

U.S.-listed China shares rose in premarket trading, with Alibaba Group Holding Ltd. which rose 2% and Baidu Inc. up 4.7%.

In other stock moves, Apple Inc. fell after a downgrade from UBS Group AG. Oracle Corp. rose after the software company reported fourth-quarter results that beat expectations and forecast first-quarter revenue growth ahead of analyst estimates.

Bank of America Corp.’s latest global survey of fund managers found investors are “exclusively long” technology stocks amid buzz around artificial intelligence. Long Big Tech was the most crowded trade, according to 55% of participants, the strongest conviction since 2020.

Elsewhere, the pound strengthened and British gilts fell after figures showed Britain’s labor market tightened unexpectedly in April, pushing two-year yields to their highest since 2008.

In commodities, oil rebounded after a sharp fall on Monday, while iron ore rose on the prospect of China’s stimulus measures.

Important events this week:

  • US CPI, Tuesday

  • Eurozone industrial production, Wednesday

  • US PPI, Wednesday

  • Federal Reserve rate decision, updated economic forecasts, Jerome Powell press conference, Wednesday

  • IEA oil market report, Wednesday

  • China property prices, retail sales, industrial production, Thursday

  • China’s central bank meeting to decide on a one-year key interest rate, Thursday

  • The president of the European Central Bank, Christine Lagarde, holds a press conference after the interest rate decision on Thursday

  • US First Jobless Claims Retail Sales Empire Manufacturing Corporate Inventories Industrial Production Thursday

  • Bank of Japan rate decision, Friday

  • US University of Michigan consumer sentiment, Friday

Some of the main features of markets:


  • The Stoxx Europe 600 rose 0.2% as of 10:40 a.m. London time

  • S&P 500 futures rose 0.2 percent

  • Nasdaq 100 futures rose 0.4 percent

  • Futures on the Dow Jones Industrial Average were little changed

  • The MSCI Asia Pacific index rose 1.1%

  • MSCI Emerging Markets index rose 1%


  • The Bloomberg Dollar Spot index fell 0.3 percent

  • The euro rose 0.4% to $1.0805

  • The Japanese yen was little changed at 139.55 per dollar

  • The offshore yuan was little changed at 7.1631 per dollar

  • The British pound rose 0.5% to $1.2569


  • Bitcoin rose 0.8% to $26,114.23

  • Ether rose 0.5% to $1,746.96


  • The yield on 10-year government bonds was little changed at 3.73%

  • Germany’s 10-year yield fell two basis points to 2.37%

  • UK 10-year yields rose three basis points to 4.37%

Raw materials

  • Brent crude rose 1.4% to $72.87 a barrel

  • Spot gold rose 0.3% to $1,963.20 an ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Tassia Sipahutar, Eva Szalay and Allegra Catelli.

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