US stock futures climbed, with dip buyers drawn to attractive valuations after three weeks of Wall Street declines. European stocks rose as investors assessed responses to the region’s energy crisis ahead of the European Central Bank’s policy meeting later this week.
S&P 500 and Nasdaq 100 contracts both advanced by about 0.6%, with cash trading set to resume after the Labor Day holiday. Gains in retailers, autos, and travel shares lifted the Stoxx Europe 600 Index, while energy underperformed as a rally in oil-cooled.
The pound rebounded and an index of domestically focused UK stocks rose as traders assessed the agenda of incoming Prime Minister Liz Truss. The new leader is finalizing plans for a £40 billion ($46 billion) support package to lower energy bills for businesses, according to documents seen by Bloomberg. A dollar gauge edged higher.
Treasuries dipped, led by shorter maturities, taking the two-year yield to 3.46%. European natural gas prices eased with politicians scrambling to find solutions after Moscow switched off its main pipeline to the continent. Gains in oil prices sparked by an OPEC+ output cut faltered on demand risks from China’s Covid lockdowns.
Soaring energy costs are adding to the complexities for policymakers attempting to manage surging inflation and the risk of recession. The focus turns next to the ECB, with economists at some of Wall Street’s top banks expecting it to announce a hike of 75 basis points on Thursday.
“The global economy, and in particular the European economy is really faced with a number of very difficult challenges, of which energy is sitting at the heart of everything,” Seema Shah, chief global strategist at Principal Global Investors, said on Bloomberg Television. “It does, unfortunately, mean that Europe despite all the help that governments are trying to provide for families and businesses, it’s simply not going to be enough to stave off a pretty significant downturn.”
European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least $1.5 trillion, according to Norwegian energy company Equinor ASA. Aside from inflating bills and fanning inflation, the biggest energy crisis in decades is sucking up capital to guarantee trades amid wild price swings.
In US premarket trading, Bed Bath & Beyond Inc. dropped as much as 25% after Chief Financial Officer Gustavo Arnal fell to his death Friday from a Manhattan skyscraper. Digital World Acquisition Corp. shares slumped as much as 33% after the blank-check firm that is set to merge with former President Donald Trump’s social media group reportedly failed to get enough shareholder support to extend the deadline to complete the deal.
Elsewhere, Bitcoin traded just below the $20,000 level, while gold was steady.
Meanwhile, one of Wall Street’s biggest bears is turning even more pessimistic on the outlook for US earnings against the backdrop of a slowdown in economic growth.
Morgan Stanley strategist Michael J. Wilson cut his expectations for earnings-per-share growth for the year, saying that a slowing economy is now likely to be a bigger concern for stocks, rather than scorching inflation and a hawkish Federal Reserve. In 2023, he expects earnings to fall 3% even in the absence of a recession.
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What to watch this week:
- Apple event due to feature new iPhones, watches, Wednesday
- Bank of England Governor Andrew Bailey at Treasury Committee, Wednesday
- Fed’s Beige Book of regional economic activity, Wednesday
- Cleveland Fed President Loretta Mester due to speak, Wednesday
- European Central Bank rate decision, Thursday
- Fed Chair Jerome Powell speaks at a Cato Institute conference in Washington, Thursday
- Reserve Bank of Australia Governor Philip Lowe speaks at event, Thursday
- China PPI, aggregate financing, money supply, new yuan loans, Friday
- EU energy ministers extraordinary meeting on emergency intervention in electricity markets, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.6% as of 7:31 a.m. New York time
- Futures on the Nasdaq 100 rose 0.6%
- Futures on the Dow Jones Industrial Average rose 0.7%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $0.9930
- The British pound rose 0.6% to $1.1584
- The Japanese yen fell 1% to 141.98 per dollar
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.25%
- Germany’s 10-year yield declined two basis points to 1.54%
- Britain’s 10-year yield advanced three basis points to 2.97%
Commodities
- West Texas Intermediate crude fell 0.5% to $86.44 a barrel
- Gold futures rose 0.1% to $1,724.40 an ounce
Source By: Bloomberg