- Countdown to series of central bank meetings
- Euro climbs ahead of the ECB meeting on Thursday
- Oil companies raise prices after Saudi Arabia’s decision
- U.S. CPI expected on Friday to test thinking on Fed fund rate hikes
The U.S. stock prices climbed on Monday after gains in Europe and Asia following China’s easing restrictions. Investors expect an increase in interest rates despite crude oil selling at $120 per barrel in the coming days.
The dollar gained marginally against the Euro ahead of the ECB meeting expected on Thursday. However, it weakened against the New Zealand, Canadian and Australian dollars even as risk appetite increased.
The sterling pound climbed ahead of a confidence vote against PM Boris Johnson. However, he survived the no-confidence vote.
A Wall Street Journal notes that Chinese regulators are winding up investigations into Didi Global Inc, A ride-hailing company, and easing domestic Covid regulations. These actions have increased sentiment.
Marc Chandler, Bannockburn Global Forex’s Chief Market Strategist remarks.
“You’ve got the world’s second-largest economy continuing to open up,” he said. “It looks like Didi may be available again at the mobile app stores, and Beijing opened up public transportation.”
Didi shares climbed by 37.3% on the Journal report, which enabled Hong Kong’s Hang Seng Tech Index to surge by 4.6% higher.
Comments from the U.S. secretary Gina Raimondo aided the sentiment that President Biden asked his team to consider lifting some tariffs on Chinese imports.
Chandler continues,
“People no longer speculate that the Federal Reserve might hike interest rates by 75 basis points and have backtracked a bit from a 50 basis-point hike in September, boosting sentiment.”
The Major Stock Indexes in the U.S. surged along with giant bourses for Europe, including Italy(FTSE MIB), Britain(FTSE), France (FCHI), Spain (IBEX), and Germany (GDAXI), all climbing above 1%.
The STOXX 600 Index(STOXX) climbed 0.92%, while the MSCI’s stocks gauge(MIWD00000PUS) rose by 0.31%.
On Wall Street, the Dow Jones Industrial Average(DJI) fell by 0.08%, the S&P 500(SPX) rose 0.20%, and Nasdaq Composite(IXIC) gained 0.25%. Further, the Growth Shares(IGX) gained 0.3%.
The U.S. Treasury Yields gained as the market gets ready for a $96 billion debt settlement ahead of U.S. inflation data expected this Friday.
The Consumer Price Index the CPI is expected to have risen by 0.7% in the previous month compared with April’s 0.3%. Likewise, annual inflation remains unchanged at 8.3%.
The three debt actions will likely push higher yields as lenders and traders prepare for the issuance.
The yield on the ten-year treasury notes went up to reach 3.034% for the first time; the base yields have gained above 3% in three weeks.
At the ECB meeting, President Christine Lagarde is expected to confirm the close of the bond-buying season this month and an increase in rates in July. However, the decision may revolve around 25 or 50 bps since several investment banks increased their expectations.
Typically money markets are priced for 130 bps by the end of the year. A higher number heightens the expectations of an aggressive tightening by the FED in the coming week, With markets priced for half-point raises in June and July and up to 200 bps by year-end.
The dollar index gained 0.313%, with the Euro falling by 0.29% to $1.0688. This was not good for the YEN, which weakened by 0.82% to close at 131.96 per dollar.
Even with the jerky trade, oil prices remained unchanged. However, producers may ease tight supply, supported by Saudi’s rising crude oil prices and concerns over a higher output target for OPEC.
The U.S. crude futures settled at 37 cents at $118.50 per barrel, and Brent fell 21 cents to close at $119.51 per barrel.
Gold prices fell due to the uptick in Treasury yields and the dollar. The U.S. gold futures slid down to 0.4% at $1,843.70 per ounce.
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