(Bloomberg) — US stock futures rose as expectations of Federal Reserve interest-rate cuts continued to drive gains, while Treasuries eased after a rally that pushed global bonds into bull-market territory.
S&P 500 contracts edged higher by 0.1% as rate-sensitive tech stocks climbed in premarket trading. The yield on 10-year Treasuries rose two basis points to 4.06%. The dollar slid for a third day, with the yen driving advances among major currencies on renewed signals of policy tightening by the Bank of Japan.
In Europe, the Stoxx 600 posted modest gains as investors looked out for the next steps in France’s battle to repair its finances. Anglo American Plc rallied more than 9% after agreeing to a tie-up with Canada’s Teck Resources Ltd. Bonds weakened across the board.
The S&P 500 and US bonds have been on a tear as traders increasingly stoked bets that the Fed will kick-off rate cuts this month. Despite clear cracks in the labor market, investors are wagering that the economy is still sufficiently robust to power corporate earnings.
“This is a supportive combination for equity markets,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets. “We believe that AI demand is still strong and will continue to support earnings in the sector, pushing returns in the sector — and hence overall equity market performance — higher.”
Swaps are pricing at least four quarter-point cuts by the time Fed Chair Jerome Powell’s term ends in May. Some are betting that this year’s easing cycle could begin with a jumbo half-point cut this month as job-market weakness outweighs lingering inflation concerns.
Tuesday’s revisions to Bureau of Labor Statistics data for payrolls for the year through March are expected to reinforce the view of a US jobs slowdown. Later this week, the core consumer price index for August is projected to show an increase of 0.3% for a second month in a row, indicating that progress on reducing price pressures has stalled.
The BLS figures “would be a big change in the job market narrative,” ING rates strategists Michiel Tukker and Benjamin Schroeder wrote in a note. This “could fuel questions of why the Fed shouldn’t cut by 50 basis points this month.”
In France, bonds were little changed as President Emmanuel Macron started his search for a premier capable of steering a budget through a deeply fractured National Assembly. The continued lack of common ground has weighed on sentiment, driving up the country’s risk premium.
“No one was expecting a bloodbath on the markets today, it’s clear that the worst-case scenario of snap elections is not taking place, at least right now,” said Vincent Juvyns, chief investment strategist at ING in Brussels. “So at the moment we’re muddling through, but with a spread with Germany that is at levels of the sovereign debt crisis of 2012.”
Shares in Indonesia declined after the longtime finance minister was removed. Yield premiums on Indonesian dollar bonds and the cost to insure them against default widened.
Oil rose for a second day as investors weighed the prospect for softening demand after Saudi Arabia cut pricing for most of its grades. Iron ore climbed for a sixth day and headed for its highest close in more than six months on expectations that Chinese demand will gather momentum.
Corporate News:
Anglo American Plc has agreed to combine with Canada’s Teck Resources Ltd. in one of the biggest mining deals in more than a decade. Rupert Murdoch and his children resolved a messy family feud with a settlement that gives favored son Lachlan Murdoch broad control and ensures Fox News and the rest of the sprawling media empire retains its conservative slant. ASML Holding NV is investing €1.3 billion ($1.5 billion) in France’s Mistral AI, an unusual move for the Dutch chipmaking equipment company that shores up Europe’s most important artificial intelligence startup. Banca Monte dei Paschi di Siena SpA has secured a majority stake in Mediobanca SpA, cementing a once-unthinkable €16 billion takeover that’s set to reshape Italian finance. The Dutch government is embarking on another reduction in its stake in ABN Amro Bank NV as it continues to gradually pare its holdings in the lender it bailed out during the financial crisis. KNDS NV Chief Executive Officer Jean-Paul Alary said he’s preparing the Franco-German tankmaker for an initial public offering to bolster the shareholder base and enable investments and acquisitions. Stocks
S&P 500 futures rose 0.1% as of 6:40 a.m. New York time Nasdaq 100 futures rose 0.2% Futures on the Dow Jones Industrial Average were little changed The Stoxx Europe 600 rose 0.1% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro was little changed at $1.1758 The British pound rose 0.3% to $1.3580 The Japanese yen rose 0.7% to 146.48 per dollar Cryptocurrencies
Bitcoin rose 0.8% to $112,870.61 Ether rose 1.3% to $4,353 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.06% Germany’s 10-year yield advanced two basis points to 2.67% Britain’s 10-year yield advanced one basis point to 4.62% Commodities
West Texas Intermediate crude rose 0.8% to $62.73 a barrel Spot gold rose 0.4% to $3,650.92 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani and Julien Ponthus.
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