(Bloomberg) — European stocks rose on Wednesday as traders braced for the Federal Reserve to accelerate its removal of monetary stimulus. Treasury yields and the dollar dipped.
Europe’s Stoxx 600 Index gained after five days of losses, with technology shares outperforming after slumping on Tuesday. S&P 500 and Nasdaq 100 index futures also rose. MSCI Inc.’s Asia-Pacific share gauge slipped for a fourth session, as a range of Chinese data suggested slowing growth amid a deepening property market slump and Covid disruptions.
Traders are looking to a wave of central bank decisions for clarity on the timing of a pullback, with the Fed decision later on Wednesday, followed by the Bank of England and European Central Bank Thursday. The Fed is set to unveil a quicker tapering of bond purchases, paving the way for the first interest-rate increases since 2018 as it pivots to restraining the hottest inflation in almost 40 years.
The mix of intense price pressures — U.S. producer-price inflation hit a record of almost 10%, while U.K. inflation surged to its highest level in more than a decade — diminishing central bank support and economic uncertainty around the omicron virus variant is testing markets.
“We expect the markets to be volatile primarily because of the back and forth on the Covid news” and “worries again about inflation,” Rebecca Felton, RiverFront Investment Group senior market strategist, said on Bloomberg Television. “High valuations and uneven data are probably what we are going to see for the next couple of months.”
Elsewhere, oil fell for a third day as further restrictions were imposed to counter the spread of omicron, while the outlook for demand in China dimmed and the International Energy Agency said the global market had already returned to surplus.
Europe’s energy crunch is straining budgets as governments boost spending to help consumers and companies weather a spike in heating and electricity costs that risks extending beyond the winter.
U.S.-China tension also continues to bubble: the Biden administration is considering imposing tougher sanctions on Semiconductor Manufacturing International Corp., China’s largest chipmaker. The Financial Times reported the U.S. will add eight more Chinese companies to an investment blacklist.
Here are some key events this week:
- China releases November industrial output, retail sales data, Wednesday.
- Fed rate decision, Wednesday.
- U.S. business inventories, retail sales, empire manufacturing, Wednesday.
- 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
- The Stoxx Europe 600 rose 0.5% as of 8:31 a.m. London time
- Futures on the S&P 500 were little changed
- Futures on the Nasdaq 100 were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.6%
- The MSCI Emerging Markets Index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.1272
- The Japanese yen was little changed at 113.69 per dollar
- The offshore yuan was little changed at 6.3715 per dollar
- The British pound rose 0.3% to $1.3266
Bonds
- The yield on 10-year Treasuries declined one basis point to 1.43%
- Germany’s 10-year yield was little changed at -0.37%
- Britain’s 10-year yield advanced one basis point to 0.73%
Commodities
- Brent crude fell 0.5% to $73.35 a barrel
- Spot gold was little changed
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