Friday’s buoyant Wall Street close helps Europe to good start on Monday

London/Tokyo — European stocks started on a strong footing on Monday after Wall Street’s positive close on Friday, with focus turning to US inflation data for more clues on whether interest rates have peaked.

MSCI’s gauge of global equities rose 0.2% to a four-week high of 667.7 and the pan-European Stoxx 600 index gained 0.8%.

“With less hawkish remarks from European and British central bankers in the past few days, there’s a hope that we might be near peak rate hikes,” said Russ Mould, investment director at AJ Bell.

“Here in the UK, it looks like markets almost believe they’ll dodge recession, the currency won’t collapse and the worst expectations won’t come to be,” he added.

The UK’s blue chip stock index led the region’s modest set of stock index gains by ticking up 0.8% by 9.30am GMT.

Elsewhere, an edge up in US treasury yields helped send the dollar to a fresh one-year high against the yen, while scuppering an early tech-led equity rally.

Benchmark 10-year treasury yields pushed to a one-week high of 4.668% during the Asian trading day, testing the top of their recent range since soft non-farm payroll figures at the start of the month stoked bets for earlier Federal Reserve rate cuts. They have since recovered to 4.632%.

The dollar hit ¥151.78 for the first time since mid-October last year, despite being stable against the euro and sterling and was still hovering at ¥151.70 near those highs at 9.30am GMT.

Japan’s Nikkei gave up early gains of more than 1% to end the day almost flat.

US equity futures also pointed 0.20% lower, following Friday’s 1.56% rally for the S&P 500.

Nomura Securities strategist Naka Matsuzawa said equities are likely close to a peak.

“Up until now, the market has been taking bad economic news as good news, because that would mean a pause in Fed rate hikes,” he said.

“But now, the treasury market has already priced in a pause, so there’s not much room for treasury yields to fall further,” removing a support for the stock market, he added. “In short, I don’t think the stock market rally is going to continue.”

The week is packed with big risk events, from consumer inflation and retail sales figures from the US on Tuesday and Wednesday, respectively. Chinese retail sales are also due Wednesday, following lacklustre sales growth at the annual Singles Day shopping festival over the weekend.

The marquee geopolitical event is also mid-week, with a meeting between US President Joe Biden and Chinese leader Xi Jinping on the sidelines of an Asia-Pacific Economic Co-operation (APEC) summit in San Francisco.

Investors, however, paid little attention to a Moody’s announcement late on Friday that it had lowered its outlook on the US credit rating to “negative” from “stable”.

Crude oil prices eased on Monday as demand worries trumped supply concerns, amid slowing growth in the US and China.

Brent crude futures for January and US West Texas Intermediate (WTI) crude futures for December edged lower, both down about 5c at $81.37 and $77.13 a barrel.

Both benchmarks gained nearly 2% on Friday as Iraq voiced support for oil cuts by Opec+.

Reuters