US futures rose and European stocks steadied as investors put aside concerns about the worsening global outlook, while UK bonds tumbled and the pound rose amid UK policy confusion.
The yield on 30-year gilts rose above 5% for the first time since late September after the Bank of England confirmed its plan to end emergency bond purchases on Friday and a report showed the UK economy shrank unexpectedly in August. Sterling rallied more than 1% after a report from Politico that the government may make further fiscal U-turns.
“The Bank of England is a test case for how hawkish central banks can be without doing damage to financial stability,” said Michael Metcalfe, global head of macro strategy at State Street Global Markets.
Meanwhile, Treasury yields and the dollar were little changed as traders await a key US inflation measure due Thursday that’s set to return to a four-decade high, underscoring broad and elevated price pressures that are pushing the Federal Reserve toward yet another large interest-rate hike next month. US investors are also looking to corporate earnings for clues about Fed policy.
“While futures positioning is now slightly less extreme, it is still a very bearish set up into what is seen as a binary market event tomorrow,” said Carl Dooley, head of EMEA trading at Cowen in London. That makes it “natural to see some bear covering, with the remaining bulls having another roll of the dice.”
Among notable premarket moves, Norwegian Cruise Line Holdings Ltd. gained after UBS raised its recommendation on the stock to buy amid strong improvement in bookings. Chip stocks were set to recoup some of this week’s losses stemming from fresh curbs on China’s access to US semiconductor technology.
In Europe, Credit Suisse Group AG slumped after a report that US authorities are investigating whether the bank helped clients hide assets.
Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”
Elsewhere, gold and oil prices fluctuated.
NATO defense chiefs gathered in Brussels to discuss how to better protect critical infrastructure, ramp up weapons production and maintain support for Ukraine. In China, Shanghai is quietly shutting down schools and a raft of other venues as officials try to rein in a flareup that’s hit the financial hub.
Key events this week:
- Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
- FOMC minutes for September meeting, Wednesday
- US PPI, mortgage applications, Wednesday
- OPEC Monthly Oil Market Report, Wednesday
- Fed’s Michelle Bowman and Neel Kashkari speak
- ECB’s Christine Lagarde speaks
- US CPI, initial jobless claims, Thursday
- G-20 finance ministers and central bankers meet, Thursday
- China CPI, PPI, trade, Friday
- US retail sales, business inventories, University of Michigan consumer sentiment, Friday
- BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
- Futures on the S&P 500 rose 0.7% as of 7:11 a.m. New York time
- Futures on the Nasdaq 100 rose 0.9%
- Futures on the Dow Jones Industrial Average rose 0.5%
- The Stoxx Europe 600 was little changed
- The MSCI World index fell 1%
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $0.9708
- The British pound rose 0.9% to $1.1070
- The Japanese yen fell 0.4% to 146.48 per dollar
- Bitcoin rose 0.7% to $19,145.96
- Ether rose 1.4% to $1,299.87
- The yield on 10-year Treasuries was little changed at 3.95%
- Germany’s 10-year yield advanced seven basis points to 2.37%
- Britain’s 10-year yield advanced 10 basis points to 4.54%
- West Texas Intermediate crude rose 0.3% to $89.59 a barrel
- Gold futures fell 0.5% to $1,676.80 an ounce