(Bloomberg) – U.S. stock futures edged higher and the dollar slipped for a second day, as investors awaited a speech by Federal Reserve Chairman Jerome Powell for signals on interest rate hike roadmap and assessment of the reopening prospect of the Chinese economy.
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European shares rose by the most in more than a week, led by consumer products and autos. Contracts on the S&P500 and Nasdaq 100 posted moderate gains, with the major indexes posting three days of losses.
Investors will focus their attention on Powell’s comments later on the economy and the labor market. Many expect him to signal that the next Fed rate hike will fall to 50 basis points, although he will also likely warn that policy tightening must continue.
Signs of slower rate hikes, coupled with growing optimism about China’s reopening, pushed the dollar lower and sent the greenback into its worst month since 2010. Yields on the benchmark 10-year Treasury note fell and fell more than 25 basis points in November.
There is a degree of caution among traders ahead of the Fed chair’s remarks, given that global inflation remains high and the job market strong.
“The market is hesitating a bit,” said Societe Generale strategist Kenneth Broux. “I would be very surprised if it was a peaceful speech.” Some might hold the view that “the dollar has peaked and the Fed Funds rate will peak at 5%, but I fear that Powell will tell them it is too soon,” he said.
Asian shares rose amid growing signs that China is easing its Covid-Zero policy. The offshore yuan strengthened, extending Tuesday’s rally, even as China’s factory and service activity continued to decline in November, a reminder that restrictions Large-scale travel continues to put pressure on economic growth.
“The market wants to see the good news stemming from China’s gently changing stance on lockdowns but the reality is that a full reopening is still a long way off,” said James Athey, chief investment officer at Abrdn. It will take time and it will be difficult to do politically.”
Oil prices rose for a third day in a row, after industry data showed a significant drop in US crude inventories and investors counted down to the OPEC+ meeting for the group to agree to production cuts.
In a US premarket transaction, Crowdstrike Holdings Inc. sank after the cybersecurity company’s revenue outlook fell short of analyst estimates. Hewlett Packard Enterprise Co. rallied after forecasting sales that beat expectations.
Amid all the recent volatility in the market, a global stock index is trending up for a second time on a monthly basis, while bonds are poised to rise monthly as well. The move to lock in stocks and bonds brought their correlation to the highest level since 2012, putting pressure on investors looking to hedge risk by dividing their portfolios between two types of assets.
This week’s main events:
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EIA Crude Oil Inventory Report, Wednesday
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Speech by Fed Chairman Jerome Powell, Wednesday
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Fed releases Beige Book on Wednesday
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US Wholesale Inventories, GDP, Wednesday
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S&P Global PMI, Thursday
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US Construction Spending, Consumer Income, Initial Jobless Claims, ISM Manufacturing, Thursday
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BOJ’s Haruhiko Kuroda speaks on Thursday
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US unemployment rate, nonfarm payrolls, Friday
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Christine Lagarde of the ECB speaking on Friday
Some key moves in the market:
share
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Stoxx Europe 600 up 0.5% at 9:46am London time
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S&P 500 futures rose 0.2%
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Nasdaq 100 futures rose 0.2%
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Dow Jones Industrial Average futures rose 0.1%
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MSCI Asia Pacific Index up 0.9%
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The MSCI Emerging Markets Index rose 1.6 percent.
currency
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Bloomberg Dollar Spot Index drops 0.3%
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The euro rose 0.3% to $1.0361
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Japanese yen fell 0.2% to 138.85 per dollar
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Offshore yuan rose 0.6% to 7.0991 per dollar
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British Pound rose 0.3% to $1.1989
electronic money
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Bitcoin up 2.5% to $16,864.02
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Ether rose 3.8% to $1,265.72
bonds
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Yields on 10-year Treasuries fell one basis point to 3.73%
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German 10-year yield was little changed at 1.93%
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UK 10-year yield rose two basis points to 3.12%
Goods
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Brent crude oil rose 2.2% to 84.85 USD/barrel
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Spot gold rose 0.6% to $1,760.21 an ounce
This story was produced with assistance from Bloomberg Automation.
–With support from Richard Henderson.
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