Stocks Mixed as Traders Assess Fed Rate Path: Markets Wrap


Stocks were mixed as investors weighed the prospect of large interest rate hikes by the Federal Reserve. Treasury yields and the dollar edged higher.

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(Bloomberg) — Stocks were mixed as investors weighed the prospect of large interest rate hikes by the Federal Reserve. Treasury yields and the dollar edged higher. 

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European stocks advanced as banks outperformed, while utilities slumped. US futures were little changed, with the S&P 500 adding 0.1% after closing in the green thanks to dip buyers late in the session. The MSCI Asia Pacific Index reversed earlier gains to trade lower.

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Traders remain focused on US economic data, with a decline in producer prices there providing some relief after the jolt from consumer-price figures saw wagers for rate increases ratchet higher. Retail sales due Thursday and University of Michigan readings Friday will be parsed for clues on the strength of the economy and inflation expectations.  

“I think you want to begin to add risk back into your portfolio,” Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments said on Bloomberg TV. “I do think, despite the CPI number we got the day before yesterday, we are approaching or at peak inflation, and historically it has always been appropriate and good for your portfolio if you added to equities when we hit peak inflation.”

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Swaps traders are pricing in a 75 basis point hike when the Fed meets next week, with some wagers appearing for a full-point move. The continued rise in rate-sensitive Treasuries deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century. 

Read More: US 2- to 30-Year Curve Reaches Most Inverted Level This Century

Among individual stock moves, H&M climbed as much as 1.5% after the Swedish apparel retailer reported a better “back-to-school” period, outweighing fiscal 3Q sales that missed analyst estimates. The banking sector, which falls into the so-called value category, is emerging as an inflation winner, showing the best performance among industry groups in Europe this month. 

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Asian currencies remained at risk from a strong greenback. The yen weakened on Thursday to trade around 143.75 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention. 

Oil fluctuated as traders grappled with concerns about global demand and assessed comments from the US on refilling strategic reserves. Natural gas increased again as traders weighed if Europe’s steps to contain the energy crisis will be enough to curb costs of the fuel after a price cap proposal was ditched for lack of consensus. Gold fell.

What’s your dollar bet ahead of the Fed decision? This week’s MLIV Pulse survey asks about the best trades ahead of the FOMC meeting. Please click here to share your views anonymously.

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Here are some key events to watch this week:

  • US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
  • China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
  • Euro area CPI, Friday
  • US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.3% as of 8:20 a.m. London time
  • Futures on the S&P 500 rose 0.1%
  • Futures on the Nasdaq 100 were little changed
  • Futures on the Dow Jones Industrial Average rose 0.1%
  • The MSCI Asia Pacific Index fell 1.8%
  • The MSCI Emerging Markets Index fell 1.8%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro fell 0.1% to $0.9968
  • The Japanese yen fell 0.4% to 143.72 per dollar
  • The offshore yuan was little changed at 6.9783 per dollar
  • The British pound was little changed at $1.1530

Bonds

  • The yield on 10-year Treasuries advanced four basis points to 3.44%
  • Germany’s 10-year yield advanced four basis points to 1.76%
  • Britain’s 10-year yield advanced five basis points to 3.18%

Commodities

  • Brent crude fell 0.3% to $93.79 a barrel
  • Spot gold fell 0.6% to $1,687.19 an ounce

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