US futures rise on earnings amid countdown to Fed: markets wrap

Brent crude rose 0.8% to $105.24 a barrel.
Image: Michael Nagle/Bloomberg

Stocks and US equity futures rallied Wednesday as a batch of resilient company earnings helped alleviate some of the wider caution in markets ahead of a pivotal Federal Reserve monetary-policy meeting.

Contracts on the tech-heavy Nasdaq 100 added about 1.5%, while S&P 500 futures were up 1%, after reassuring reports from Alphabet Inc., Microsoft Corp. and Texas Instruments Inc. European stocks also rose, with the banking sector outperforming even as Credit Suisse Group AG posted a larger-than-expected loss and Deutsche Bank AG warned on costs.

The mood remains edgy ahead of a much-anticipated Fed interest-rate increase — part of a global wave of monetary tightening to quell inflation that’s stoking concerns about a worldwide economic slowdown.

The dollar and Treasury yields were little changed as traders brace for a widely telegraphed 75 basis-point Fed hike later Wednesday. Oil and European natural gas prices extended gains.

Credit Suisse replaced its embattled chief executive officer and said it would embark on a new turnaround plan just nine months after the last one, while Deutsche Bank scrapped an efficiency target for the year and warned a key profitability goal was getting harder to reach.

Meanwhile, UniCredit SpA shares soared about 6% after posting second-quarter profit that almost doubled analyst expectations and lifted its full-year target in anticipation of further gains from rising interest rates in Europe.

The projected Fed move to tackle price pressures would cement a combined 150 basis points increase over June and July — the steepest rise in rates since the 1980s, when then chairman Paul Volcker wrestled with sky-high inflation.

The key question is whether Chair Jerome Powell’s policy signals validate or refute scaled-back bets projecting a 3.4% peak fed funds rate around year-end and cuts in 2023 to shore up an economy at risk of recession.

“The Fed hasn’t even gotten to neutral yet,” Jason England, global bonds portfolio manager at Janus Henderson Investors, said on Bloomberg Television. “For them to start easing already or for them to start seeing eases priced in is, I think, a little premature.”

IMF warning

Monetary tightening, Europe’s energy woes amid Russia’s invasion of Ukraine and challenges from China’s property sector and Covid are among the risks darkening the global outlook. The International Monetary Fund warned the world economy may soon be on the cusp of an outright recession.

US company earnings are providing a sliver of hope — more than three-quarters of firms that have reported so far either beat or met expectations. But there are doubts about how long they can weather economic challenges.

“Inflation is hurting companies and the question is whether these policy rate hikes are going to do anything to alleviate the pain,” Quadratic Capital Management founder Nancy Davis said on Bloomberg Television.

Elsewhere, President Joe Biden will speak with Chinese leader Xi Jinping on Thursday amid fresh tensions over Taiwan. The White House is also considering whether to lift some tariffs on Chinese imports to stem inflation.

Here are some key events to watch this week:

  • Apple, Amazon, Meta earnings due this week
  • Fed policy decision, briefing, Wednesday
  • Australia CPI, Wednesday
  • US GDP, Thursday
  • Euro-area CPI, Friday
  • US PCE deflator, personal income, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.5% as of 8:41 a.m. London time
  • Futures on the S&P 500 rose 1%
  • Futures on the Nasdaq 100 rose 1.5%
  • Futures on the Dow Jones Industrial Average rose 0.5%
  • The MSCI Asia Pacific Index rose 0.2%
  • The MSCI Emerging Markets Index rose 0.3%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.2% to $1.0140
  • The Japanese yen was little changed at 137.02 per dollar
  • The offshore yuan was little changed at 6.7654 per dollar
  • The British pound rose 0.1% to $1.2046

Bonds

  • The yield on 10-year Treasuries was little changed at 2.81%
  • Germany’s 10-year yield advanced four basis points to 0.96%
  • Britain’s 10-year yield advanced two basis points to 1.94%

Commodities

  • Brent crude rose 0.8% to $105.24 a barrel
  • Spot gold was little changed
© 2022 Bloomberg

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