Stocks and Dollar Rise Before Data, Powell Speech: Markets Wrap

(Bloomberg) — US equity futures edged higher as investors wait to see if upcoming price data and a speech from Federal Reserve chief Jerome Powell will boost expectations for a December interest-rate cut.

Contracts for the S&P 500 and Nasdaq 100 rose about 0.1% in a fresh sign that a post-election equity surge is starting to slow. Treasury yields also ticked lower, after Wednesday’s consumer inflation data kept alive the likelihood of a Fed rate cut next month. However, the dollar index extended its rally to hold near two-year highs and Bitcoin traded at about $91,000, holding close to Wednesday’s record high.

Investors are trying to balance a picture of easing inflation and falling rates against the possibility that President-elect Donald Trump will implement hardline pledges on taxes and tariffs, reigniting price growth next year. Confirmation of a Republican election clean sweep suggests more policy leeway for Trump and limits potential curbs on his power.

“We are seeing that there is a bit more discrimination between Trump trades,” said Amelie Derambure, senior multi-asset portfolio manager at Amundi.

“There is expectation that Trump’s policies will be market friendly, growth friendly, will be impacting higher inflation but not massively, deregulation is going to be good for some sectors,” she said. “The assumption is we have good, soft Trump with no big negative impact priced by markets.”

Meanwhile, the likelihood of so-called America-First policies has boosted the dollar more than 2% so far this month. Its gains are weighing on a raft of assets, sending gold prices near two-month lows and pushing the yen to the weakest since July, close to levels when Japanese authorities last intervened to prop up the currency. 

The euro dropped as much as 0.5% to touch the lowest in more than a year, while MSCI’s index for emerging market currencies fell for a fifth day. 

Analysts at Brown Brothers Harriman said that with Trump likely to have the wherewithal to carry out his agenda, the scope for rate cuts could be limited going forward. 

“Market pricing for the Fed has already adjusted, which is giving the dollar a huge lift,” they wrote, advising that “investors should continue to lean into dollar strength.”

Currently, money markets price around 19 basis points of rate cuts for December and several policymakers have urged a cautious approach. Fed Governor Adriana Kugler, for instance, said on Thursday that rate cuts should be paused if progress on inflation stalls. 

Traders’ eyes will now be on US producer price data which is expected to show headline and core producer prices rose year-over-year in October. Fed chief Jerome Powell is also due to speak later in the day. 

Among individual stocks, Cisco Systems Inc. fell in premarket trading after the networking company firm gave a conservative outlook, while Nu Holdings Ltd. dropped after the fintech company reported third-quarter net interest income that missed consensus estimates. In Europe, a pair of bullish outlooks from chip-equipment maker ASML Holding NV and German industrial giant Siemens AG, lifted the Stoxx 600 index by about 0.8%.

 

Key events this week:

• US PPI, jobless claims, Thursday
• Fed speakers include Jerome Powell, John Williams and Adriana Kugler, Thursday
• China retail sales, industrial production, Friday
• US retail sales, Empire manufacturing, industrial production, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 7:20 a.m. New York time
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 rose 0.8%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.3% to $1.0531
• The British pound fell 0.4% to $1.2658
• The Japanese yen fell 0.3% to 155.96 per dollar

Cryptocurrencies

• Bitcoin rose 3.3% to $91,589.62
• Ether rose 1% to $3,186.21

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.44%
• Germany’s 10-year yield declined two basis points to 2.37%
• Britain’s 10-year yield was little changed at 4.52%

Commodities

• West Texas Intermediate crude rose 0.3% to $68.66 a barrel
• Spot gold fell 0.7% to $2,555.09 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Chiranjivi Chakraborty and John Viljoen.

©2024 Bloomberg L.P.