Stocks were mixed as investors weighed the prospect of large interest rate hikes by the Federal Reserve. Treasury yields rose and the dollar was little changed.
(Bloomberg) — Stocks were mixed as investors weighed the prospect of large interest rate hikes by the Federal Reserve. Treasury yields rose and the dollar was little changed.
European stocks and US futures advanced, while the MSCI Asia Pacific Index reversed earlier gains to trade lower. In Europe, banks outperformed, while utilities slumped.
Traders remain focused on US economic data, with a decline in producer prices there providing some relief after the jolt from consumer-price figures saw wagers for rate increases ratchet higher. Retail sales due Thursday and University of Michigan readings Friday will be parsed for clues on the strength of the economy and inflation expectations.
“I think you want to begin to add risk back into your portfolio,” Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments said on Bloomberg TV. “I do think, despite the CPI number we got the day before yesterday, we are approaching or at peak inflation, and historically it has always been appropriate and good for your portfolio if you added to equities when we hit peak inflation.”
Swaps traders are pricing in a 75 basis point hike when the Fed meets next week, with some wagers appearing for a full-point move. The continued rise in rate-sensitive Treasuries deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century.
Read More: US 2- to 30-Year Curve Reaches Most Inverted Level This Century
Among individual stock moves, H&M climbed after the Swedish apparel retailer reported a better “back-to-school” period, outweighing fiscal 3Q sales that missed analyst estimates. Shell Plc rose, taking this year’s gain to more than 45%, after the firm said its head of gas and renewables, Wael Sawan, will replace Chief Executive Officer Ben van Beurden at the end of the year.
The banking sector, which falls into the so-called value category, is emerging as an inflation winner, showing the best performance among industry groups in Europe this month. Meanwhile, the UK is considering scrapping a cap on banker bonuses.
Asian currencies remained at risk from a strong greenback. The yen weakened on Thursday to trade around 143.6 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.
Oil fluctuated as traders grappled with concerns about global demand and assessed comments from the US on refilling strategic reserves. Natural gas increased as traders assessed Europe’s steps to contain the energy crisis, with governments making plans to shut down power in some places to avoid a total collapse of the system this winter. Gold fell.
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Here are some key events to watch this week:
- US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
- China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
- Euro area CPI, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.4% as of 8:50 a.m. London time
- Futures on the S&P 500 rose 0.2%
- Futures on the Nasdaq 100 rose 0.2%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The MSCI Asia Pacific Index fell 1.8%
- The MSCI Emerging Markets Index fell 1.8%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $0.9972
- The Japanese yen fell 0.4% to 143.60 per dollar
- The offshore yuan fell 0.1% to 6.9801 per dollar
- The British pound fell 0.1% to $1.1526
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.44%
- Germany’s 10-year yield advanced three basis points to 1.75%
- Britain’s 10-year yield advanced three basis points to 3.16%
Commodities
- Brent crude rose 0.1% to $94.22 a barrel
- Spot gold fell 0.5% to $1,688.33 an ounce
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