US equity futures rose as Chinese signals for possible easing measures outweighed concern over virus curbs in Europe. European stocks were boosted by deal activity.
December contracts on the S&P 500 and Nasdaq 100 Index rose 0.3% each after a cautious week that saw the benchmark gauge underperform the technology measure. Telecom Italia SpA jumped as much as 30% after KKR & Co. bid for the company. Two- and five-year US government bond yields rose at least two basis points each. The dollar held steady, while oil erased losses.
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US stocks are trading near record levels, outpacing the rest of the world, as investors see few alternatives amid rising inflation, bouts of a selloff in bonds and a persistent pandemic that undermines global recovery. Even as sentiment remains on the edge amid expectations for a quicker-than-expected tapering by the Federal Reserve, Monday brought some cheer to traders as China’s central bank dropped language that precluded policy accommodation.
Investors are also focusing on whom President Joe Biden will pick as the Fed chair nominee from Governor Lael Brainard and incumbent Jerome Powell. Whoever is chosen may have their work cut out: US inflation is surging at the fastest pace in decades and expectations for price growth are at the highest since 2013.
A trio of Fed policy makers — Vice Chairman Richard Clarida, Governor Christopher Waller and St. Louis Federal Reserve Bank President James Bullard — have signaled that the topic of a faster taper might be on the table when the Federal Open Market Committee meets in December.
“What we are likely to see this week is more Fed members socialising that idea of a more rapid QE taper,” Jason Schenker, president and chief economist at Prestige Economics, said on Bloomberg Television. “If that idea gets out there and is repeatedly underscored, that will increase the probability that the tapering that’s announced in December will be quicker than the pace that was announced early in November.”
Europe’s Stoxx 600 gauge advanced for the first time in three days as deal activity helped to allay some of the concerns surrounding the spread of Covid-19. Telecommunications shares were the best performing group, with Telecom Italia gaining from private-equity firm KKR’s $12.2 billion bid for the company.
Equities outperformed Monday in South Korea — aided by robust export data — and climbed in China, whose central bank signaled possible easing to support a slowing economy.
Treasuries were mixed and the gap between yields on five-year and 30-year maturities was around the lowest since March 2020. Risk aversion has bolstered bonds as surging European infections push Austria toward a lockdown and spur Germany to tighten curbs. The curve flattened in part on signs the Fed may consider a faster drawdown of its bond-buying program to fight inflation.
For more market analysis, read our MLIV blog.
Here are some key events this week:
- Eurozone, U.S. PMI data Tuesday
- Reserve Bank of New Zealand rate decision Wednesday
- US FOMC minutes, consumer income, wholesale inventories, new home sales, GDP, initial jobless claims, US durable goods, University of Michigan consumer sentiment. All Wednesday
- Bank of Korea policy decision Thursday
- US Thanksgiving Day: US equity, bond markets closed Thursday
- Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday
Some of the main moves in markets:
- The Stoxx Europe 600 rose 0.4% as of 8:38 a.m. London time
- Futures on the S&P 500 rose 0.3%
- Futures on the Nasdaq 100 rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.4%
- The MSCI Asia Pacific Index fell 0.3%
- The MSCI Emerging Markets Index fell 0.4%
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.1269
- The Japanese yen fell 0.1% to 114.15 per dollar
- The offshore yuan rose 0.2% to 6.3787 per dollar
- The British pound fell 0.2% to $1.3427
- The yield on 10-year Treasuries was little changed at 1.55%
- Germany’s 10-year yield was little changed at -0.35%
- Britain’s 10-year yield was little changed at 0.88%
- Brent crude rose 0.5% to $79.26 a barrel
- Spot gold was little changed