Stocks Gain, Dollar Drops as Traders Await Powell: Markets Wrap

(Bloomberg) — US equity futures edged higher and the dollar slipped for a second day, as investors awaited a speech by Federal Reserve Chair Jerome Powell for signals about the path of interest-rate increases and assessed prospects for China’s economic reopening.

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European shares climbed the most in more than a week, led higher by auto and consumer products stocks. Contracts on the S&P500 and the Nasdaq 100 posted moderate advances, with the underlying indexes having endured three days of losses.

Investors will keep their attention trained on Powell’s comments later on the economy and the labor market. He is widely expected to signal that the next Fed rate hike will step down to 50 basis points, though he will also likely warn that policy tightening has further to run.

Those signs of slower interest rate rises, alongside mounting optimism over China’s reopening, pushed the dollar lower and put the greenback on track for its worst month since 2010. Benchmark Treasury 10-year yields slipped and are down more than 25 basis points in November.

There’s a degree of caution among traders before the Fed chair’s remarks, given still-high global inflation and a robust jobs market.

“The market is hesitating a bit,” Societe Generale strategist Kenneth Broux said. “I would be very surprised if it is a dovish speech.” Some may hold the view that “the dollar has peaked and that the Fed Funds rate will peak at 5%, but I fear Powell will tell them it’s too soon,” he said.

Asian shares gained amid growing signs that China is easing its Covid-Zero policy. The offshore-traded yuan advanced, extending Tuesday’s rally, even as China’s factory and services activity contracted further in November, a reminder that widespread movement curbs continue to pressure economic growth.

“The market wants to see good news stemming from China’s gently shifting stance towards lockdowns but the reality is that a full re-opening is still some time away and will be politically tricky to execute,” said James Athey, investment director at Abrdn.

Oil prices rose for a third day, after industry data pointed to a substantial draw in US crude stockpiles and investors counted down to an OPEC+ meeting that may see the group agree to cut production.

In US premarket trading, Crowdstrike Holdings Inc. sank after the cybersecurity company’s revenue outlook trailed analyst estimates. Hewlett Packard Enterprise Co. gained after its sales forecast surpassed expectations.

Amid all the recent bumpiness in markets, an index of global stocks was on course for a second monthly advance, while bonds were also poised for a monthly gain. The lockstep moves in stocks and bonds has taken their correlation to highest level since 2012, heaping pressure on investors seeking to hedge risk by splitting their portfolios between the two asset classes.

Key events this week:

EIA crude oil inventory report, Wednesday
Fed Chair Jerome Powell speech, Wednesday
Fed releases its Beige Book, Wednesday
US wholesale inventories, GDP, Wednesday
S&P Global PMIs, Thursday
US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday
BOJ’s Haruhiko Kuroda speaks, Thursday
US unemployment, nonfarm payrolls, Friday
ECB’s Christine Lagarde speaks, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.5% as of 9:46 a.m. London time
Futures on the S&P 500 rose 0.2%
Futures on the Nasdaq 100 rose 0.2%
Futures on the Dow Jones Industrial Average rose 0.1%
The MSCI Asia Pacific Index rose 0.9%
The MSCI Emerging Markets Index rose 1.6%

Currencies

The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 0.3% to $1.0361
The Japanese yen fell 0.2% to 138.85 per dollar
The offshore yuan rose 0.6% to 7.0991 per dollar
The British pound rose 0.3% to $1.1989

Cryptocurrencies

Bitcoin rose 2.5% to $16,864.02
Ether rose 3.8% to $1,265.72

Bonds

The yield on 10-year Treasuries declined one basis point to 3.73%
Germany’s 10-year yield was little changed at 1.93%
Britain’s 10-year yield advanced two basis points to 3.12%

Commodities

Brent crude rose 2.2% to $84.85 a barrel
Spot gold rose 0.6% to $1,760.21 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.