Thursday, July 7

European Stocks Gain With US Futures; Dollar Slips: Markets Wrap


Stocks in Europe gained in choppy trading on Monday as investors weighed whether last week’s selloff had gone far enough to price in concerns about rising rates and slowing growth.

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(Bloomberg) — Stocks in Europe gained in choppy trading on Monday as investors weighed whether last week’s selloff had gone far enough to price in concerns about rising rates and slowing growth.

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Banks and energy companies led the advance in the Stoxx Europe 600 index following the worst week for the gauge since March. Basic resources underperformed amid a slump in raw-material prices. Underscoring the uncertainty pervading markets, Swiss engineering group ABB Ltd. declined after postponing a listing of its electric-car charging business, citing volatile conditions.

France’s equity benchmark lagged after President Emmanuel Macron lost his absolute majority in parliament, putting his reform agenda in peril. UK bonds fell as the country faces up to surging inflation and labor strikes as well as a rising risk of recession in a series of setbacks that have echoes of the 1970s.

S&P 500 and Nasdaq 100 futures gained around 0.8% each. A dollar gauge edged lower. Treasury futures were mixed — there’s no cash trading due to a US holiday.

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Volatility measures remain elevated as investors look for an entry point into equity markets roiled by soaring price pressures and worries that aggressive monetary tightening will tip major economies into recession. JPMorgan strategists said pressure on stocks should ease in the second quarter as inflation moderates, but others — including Morgan Stanley — cautioned that more losses may be in store.

“Both prolonged inflation and/or a sharp increase in rates from central banks will have a deep impact on growth perspectives,” Jean-François Paren, global head of market research at Credit Agricole CIB, wrote in a note. “If anything, current valuations are more the ‘exit point’ than the ‘entry point’.”

European bonds were mixed after European Central Bank policy maker Martins Kazaks said the central bank is ready to combat unwarranted financial-market moves but must also be prepared to look through turbulence as it exits negative interest rates.

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Commodities reflected the concerns around global growth. Crude oil held Friday’s near-7% plunge, iron ore erased all of this year’s gains and copper extended losses for an eighth session after base metals capped the worst weekly in a year.

Bitcoin edged closer to $21,000 after plunging below $18,000 over the weekend. A volatile crypto slump has become emblematic of the pressure on a range of assets from sharp Federal Reserve interest-rate hikes to tame high inflation.

MSCI Inc.’s index of Asian shares dropped for an eighth day, the longest stretch since February 2020. China managed to buck the wider trend, continuing a recent spell of outperformance in part on Beijing’s vows of economic support.

What to watch this week:

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  • RBA minutes, Governor Philip Lowe due to speak, Tuesday
  • Fed Chair Jerome Powell semi-annual Senate testimony, Wednesday
  • Bank of Japan April minutes, Wednesday
  • Powell US House testimony, Thursday
  • US initial jobless claims, Thursday
  • PMIs for Eurozone, France, Germany, UK, Australia, Thursday
  • ECB economic bulletin, Thursday
  • US University of Michigan consumer sentiment, Friday
  • RBA’s Lowe speaks on panel, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.7% as of 12:57 pm London time
  • Futures on the S&P 500 rose 0.8%
  • Futures on the Nasdaq 100 rose 0.9%
  • Futures on the Dow Jones Industrial Average rose 0.7%
  • The MSCI Asia Pacific Index fell 0.2%
  • The MSCI Emerging Markets Index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%
  • The euro rose 0.3% to $1.0528
  • The Japanese yen was little changed at 134.93 per dollar
  • The offshore yuan rose 0.4% to 6.6857 per dollar
  • The British pound rose 0.2% to $1.2268

Bonds

  • Germany’s 10-year yield was little changed at 1.67%
  • Britain’s 10-year yield advanced five basis points to 2.55%

Commodities

  • Brent crude rose 0.3% to $113.45 a barrel
  • Spot gold was little changed

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