(Bloomberg) — U.S. futures rose with stocks Thursday on bets that Federal Reserve policy tightening will help fight elevated inflation without derailing economic growth. The pound jumped after the Bank of England unexpectedly raised rates.
S&P 500 and Nasdaq 100 contracts advanced, with tech giants including Apple Inc. rising in premarket trading, signaling more gains in store after Wednesday’s late rally. The U.K.’s exporter-heavy FTSE 100 Index pared some gains after the BOE decision, while European equities rallied ahead of the European Central Bank’s meeting. Asian shares also rose.
The Treasury yield curve steepened after the Fed said it will double the pace at which it tapers bond purchases, and projected three quarter-point interest-rate increases in 2022, another three in 2023 and two more in 2024. The dollar was lower.
Equities have whipsawed in recent weeks as investors attempted to price in the prospect of rate hikes, while assessing risks from the spread of the omicron variant. The market’s early response to the Fed signals some relief arising from policy clarity, and optimism that the rebound from pandemic lows can weather the pivot away from ultra-loose monetary settings.
“The market is breathing a sigh of relief that the FOMC meeting suggested that it is taking inflation risks in the United States more seriously,” Ann-Katrin Petersen, an investment strategist at Allianz Global Investors, said in an interview with Bloomberg TV. “The question really will be whether the Fed will dare to do even more in order to taper the inflation risk.”
The five-year breakeven rate on Treasury inflation protected securities — or the difference between those yields and the ones on typical Treasuries — approached 2.8%. That suggests the Fed still faces a challenge to get inflation down toward its 2% target.
“The markets seem to be complacent about the idea the Fed can get a soft landing, can engineer this graceful soft landing with not a lot of rate hikes,” Diane Swonk, chief economist at Grant Thornton, said on Bloomberg Television.
Elsewhere, oil and gold prices rose. Bitcoin hovered near $49,000.
Here are some key events this week:
- BOE rate decision, Thursday.
- ECB rate decision, Thursday.
- U.S. housing starts, initial jobless claims, industrial production, Thursday.
- BOJ monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
- “Quadruple witching” day in the U.S. market, when options and futures on indexes and equities expire, Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.7% as of 7:09 a.m. New York time
- Futures on the Nasdaq 100 rose 0.7%
- Futures on the Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 rose 1.6%
- The MSCI World index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.1308
- The British pound rose 0.7% to $1.3356
- The Japanese yen fell 0.1% to 114.17 per dollar
Bonds
- The yield on 10-year Treasuries was little changed at 1.45%
- Germany’s 10-year yield advanced two basis points to -0.34%
- Britain’s 10-year yield advanced seven basis points to 0.80%
Commodities
- West Texas Intermediate crude rose 0.9% to $71.54 a barrel
- Gold futures rose 1.3% to $1,788.10 an ounce
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