US equities rose and Treasury bonds erased losses after a reading on inflation expectations eased and Federal Reserve James Bullard suggested fears of recession have been exaggerated .
The S&P 500 rose more than 2 percent, adding to gains after the University of Michigan’s reading of long-term consumer inflation expectations eased from a 14-year high that reported initially, which could reduce the urgency of more pronounced rate increases. The 10-year Treasury yield stood at around 3.09 per cent. The Fed Chairman of St. Louis Bullard, considered the biggest hawk among Fed officials, said fears of a recession in the United States are exaggerated. He also reiterated his support for front-loading interest rate hikes to control inflation.
Traders are beginning to assess any Fed action on rates beyond the December meeting, reducing the additional tightening they expect and flirting with the possibility of cuts in 2023. But investors are still struggling with the question of what will come later if an economic recession. catch.
“Investors seem to be a bit frozen right now,” said Matt Maley, chief market strategist at Miller Tabak + Co. “They know the stock market is coming out of a level of overselling since the end of last week, so they don’t want to sell them. Significantly in case the rebound becomes a nice one. However, they also know that a recession is very likely now, so they don’t want to back up the truck and start buying stocks in a major way. “
Fed Chairman Jerome Powell tightened his determination to cool inflation in testimony before lawmakers this week, after acknowledging that a recession may be the price to pay.
“Despite false observations by Fed officials, growing concerns that their rises would trigger a recession actually meant investors would make a slower rate of rate hikes over the next 12-18 months,” Deutsche strategists said. Bank AG led by Jim Reid. he wrote in a note. “That had an impact on the Treasury.”
Investors continued to take cash from equity funds, which recorded their largest outflows in nine weeks amid rising risk of recession. About $ 16.8 billion came out of global equity funds during the week through June 22, and U.S. stocks saw their first exit in seven weeks at $ 17.4 billion, he said. Bank of America Corp., citing data from EPFR Global.
West Texas Intermediate crude rose after falling during the previous two sessions. The U.S. benchmark has lost nearly 3 percent this week, putting prices on track for its first monthly drop since November.
The fall in commodity prices has contributed to a moderation of market measures of inflation expectations.
“It looks like the Fed has been successful at least temporarily” in its mission to cool an overheated economy, wrote Lewis Grant, a senior portfolio manager at Federated Hermes, in a note to clients. “Commodity prices have fallen from their highs as fears of recession grow.”
New home sales in the U.S. rose in May, reflecting gains in the west and south and interrupting a three-month slump as the residential real estate market adjusts to rising borrowing costs and prices still high. The increase in sales may reflect that some buyers are blocking their mortgage rate in anticipation of even higher loan costs.
Elsewhere, Bitcoin stood near US $ 21,000, extending a period of relative stability. The dollar fell.
What to see this week:
- Consumer sentiment at the University of Michigan in the United States on Friday
Some of the main movements in the markets:
Stocks
- The S&P 500 was up 2.2% at 10:30 a.m. New York time
- The Nasdaq 100 was up 2.7%.
- The Dow Jones Industrial Average rose 1.9%.
- The Stoxx Europe 600 was up 2.4%.
- The MSCI World index rose 0.4%.
Coins
- The Bloomberg Dollar Spot index fell 0.4%.
- The euro rose 0.4% to $ 1.0569
- The British pound rose 0.4% to $ 1.2309
- The Japanese yen fluctuated slightly to 134.92 per dollar
Good
- The yield on 10-year Treasury bonds ranged slightly at 3.09 percent
- Germany’s 10-year yield advanced two basis points to 1.45%.
- The UK’s 10-year yield fell one basis point to 2.30 per cent
Goods
- West Texas Intermediate crude rose 2.6% to $ 107.02 a barrel
- Gold futures changed little