Bond Rally Gets Fresh Fuel as Data Fans Rate Bets: Markets Wrap

(Bloomberg) — European bonds gained with equities as inflation data Tuesday poured fueled on a rally sparked by bets central banks are poised to accelerate interest rate-cutting cycles.

Yields on 10-year German bonds fell as much as seven basis points to the lowest level since January after euro-area inflation slowed below the European Central Bank’s 2% target for the first time since 2021. Rates traders are coming around to the idea that the ECB will deliver a consecutive quarter-point decrease this month.

The European Central Bank President Christine Lagarde said the bank is becoming more optimistic about getting price pressures under control. Her US counterpart, Federal Reserve Chair Jerome Powell, cautiously set the table for further rate cuts on Monday, saying the central bank will lower interest rates “over time.”

The Stoxx 600 added 0.3%. Contracts for the S&P 500 were little changed after the gauge notched a fresh record Monday following its fourth-consecutive quarter of gains — the longest such winning stretch since 2021. Treasuries advanced. 

Money markets imply a one-in-three chance the Fed will deliver another half-point cut in November, and price a total of about 190 basis points of easing by the end of next year. That scenario may not pan out as expected, Larry Fink warned.

“The amount of easing that’s in the forward curve is crazy,” Fink, the chief executive officer of BlackRock Inc. said in an interview with Bloomberg TV. “There’s room for easing more, but not as much as the forward curve would indicate.

 

Markets were also bracing for any effect after Israel said it had begun “targeted ground raids” in Lebanon. Oil prices dropped as prospects of a return of Libyan supply countered the risks of a wider conflict in the Middle East.

Marine shipping firm ZIM Integrated Shipping fell as much as 4.9% in premarket trading after dockworkers walked out of every major port on the US East and Gulf coasts, marking the beginning of a strike. FedEx Corp. and United Parcel Service Inc. edged higher after Stifel said they are the “most obvious beneficiaries” of disruptions caused by the strike.  

Key events this week: 

• Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins speak Tuesday
• ECB policy makers speaking include Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel on Tuesday
• BOE chief economist Huw Pill speaks Tuesday
• South Korea CPI, S&P Global Manufacturing PMI on Wednesday
• Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday
• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.3% as of 10:52 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average fell 0.3%
• The MSCI Asia Pacific Index rose 0.3%
• The MSCI Emerging Markets Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.4% to $1.1094
• The Japanese yen was little changed at 143.70 per dollar
• The offshore yuan fell 0.2% to 7.0221 per dollar
• The British pound fell 0.4% to $1.3327

Cryptocurrencies

• Bitcoin rose 0.2% to $63,929.96
• Ether rose 0.9% to $2,637.05

Bonds

• The yield on 10-year Treasuries declined four basis points to 3.74%
• Germany’s 10-year yield declined seven basis points to 2.06%
• Britain’s 10-year yield declined six basis points to 3.95%

Commodities

• Brent crude fell 1.6% to $70.53 a barrel
• Spot gold rose 0.5% to $2,648.02 an ounce

This story was produced with the assistance of Bloomberg Automation.

 

–With assistance from Jason Scott, Allegra Catelli and Alice Atkins.

©2024 Bloomberg L.P.