Stocks Climb as Dip-Buyers Propel Tech Recovery: Markets Wrap

(Bloomberg) — European stocks bounced back from their biggest decline in six weeks as Treasury yields steadied a day before a key American inflation reading.

Technology stocks led an advance of 1% in the Stoxx Europe 600 Index in the wake of a recovery in the Nasdaq 100. In U.S. futures, contracts on the tech-heavy Nasdaq rose more than those on the S&P 500. Benchmark Treasury yields stabilized near 1.75%.

The moves reversed days of selling of pricey tech and high-growth stocks driven by bets the Federal Reserve will accelerate rate liftoff. With tighter policy priced in, investors are now focusing on upcoming earnings and dip-buying prospects.

“We are looking for opportunities to raise our weighting in stocks in 2022,” according to Luca Paolini, chief strategist at Pictet Asset Management, whose firm has a neutral stance on equities. “The global recovery remains resilient, thanks to a strong labor market, pent-up demand for services and healthy corporate balance sheets.”

Wednesday’s report on U.S. consumer-price inflation is set to be a further call to action for policy makers, with the rate anticipated to have increased further in December to 7.1%, the fastest pace in almost four decades.

Swaps indicate the Fed’s target will be 88 basis points higher by the end of this year — seen by many as a sign the market is baking in three hikes, plus the possibility of a fourth — and momentum is building for the first increase to take place as soon as March.

Federal Reserve Chair Jerome Powell said the U.S. economy was expanding at a fast pace and the central bank will prevent higher inflation from becoming entrenched. In remarks for his Senate confirmation hearing, he also cautioned that the post-pandemic economy might look different than the previous expansion.

Meanwhile, Covid-19 is ushering in fresh restrictions in China and Hong Kong, while Japan is extending its border measures until the end of February. Pfizer Inc. is developing a hybrid vaccine that shields against the omicron variant. A new study showed high levels of protective immune cells that fight some common colds also made people less likely to contract Covid-19.

Elsewhere, Bitcoin recovered to around $42,000 after dipping below $40,000, putting it on track for its worst start to a year since the earliest days of digital currencies. Oil edged up.

The world’s most important base-metals exchange resumed trading after a more-than five hour halt, although some brokers reported patchy access to electronic systems as the European trading day got underway.

Read more: London Metal Exchange Trading Resumes After Five-Hour Outage (1)

Here are some key events this week:

Fed Chair Jerome Powell’s confirmation hearing in the Senate Banking Committee on Tuesday.
Kansas City Fed President Esther George and St. Louis Fed President James Bullard speak on Tuesday.
EIA crude oil inventory report on Wednesday.
China PPI, CPI on Wednesday.
U.S. CPI, Fed Beige Book on Wednesday.
U.S. initial jobless claims, PPI on Thursday.
U.S. Senate Banking Committee hearing for Lael Brainard, nominated as Fed vice-chair on Thursday.
Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker,
Chicago Fed President Charles Evans speak on Thursday.
Bank of Korea policy decision and briefing on Friday.
Wells Fargo, Citigroup, JPMorgan due to report earnings on Friday.
U.S. business inventories, industrial production, University of Michigan consumer sentiment, retail sales on Friday.
New York Fed President John Williams speaks Friday.

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 1% as of 11:16 a.m. London time
Futures on the S&P 500 rose 0.3%
Futures on the Nasdaq 100 rose 0.5%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index fell 0.1%
The MSCI Emerging Markets Index rose 0.5%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1329
The Japanese yen fell 0.2% to 115.45 per dollar
The offshore yuan was little changed at 6.3814 per dollar
The British pound rose 0.1% to $1.3596

Bonds

The yield on 10-year Treasuries was little changed at 1.76%
Germany’s 10-year yield was little changed at -0.04%
Britain’s 10-year yield declined two basis points to 1.17%

Commodities

Brent crude rose 1.4% to $81.97 a barrel
Spot gold rose 0.2% to $1,805.28 an ounce

More stories like this are available on bloomberg.com