European shares rose on Friday along with global stocks as investors took comfort in underlying economic strength and started March on a high note. Bonds halted declines.
A gauge of European stocks climbed 0.5% and headed for a weekly gain. S&P 500 futures steadied after the underlying index on Thursday posted its biggest gain in more than two weeks on renewed Fed policy pivot hopes. Asian equities rose about 1%, led higher by gains in Hong Kong and Tokyo.
Treasury yields fell after moving higher across the curve Thursday, though the 10-year benchmark held above 4%. The dollar dropped as a gauge of the currency’s strength headed for its first weekly loss since January, a tailwind for risk assets.
March’s rebound looks tentative in a market with little conviction and where investors are taking cover from an onslaught of rate increases. Cash funds attracted inflows of $68 billion in the week through March 1, according to a Bank of America note citing EPFR Global data.
Data Thursday showing continued labour market resilience supported the case for the Fed to keep tightening, a theme that pushed almost every major asset into the red in February as traders braced for higher rates to curb rampant inflation.
Swaps markets are now pricing a peak Fed policy rate of 5.5% in September, and some traders even bet that the benchmark interest rate could rise to 6%.
“There is a cohort of investors who think the Fed may have to hike a lot more and that’s why interest rates are rising as much as they have recently,” Priya Misra, global head of rates strategy at TD Securities, said on Bloomberg Television.
After the US market closed, Federal Reserve Governor Christopher Waller said that he’d favor raising interest rates even more than his current outlook if economic indicators continue to come in hotter than expected.
In other markets, Bitcoin fell to the lowest level in more than two weeks on wider retreat in the crypto markets as investors assessed the fallout of crypto-friendly US bank Silvergate Capital Corp.
Oil headed for a first weekly gain in three weeks as optimism over China’s recovery offset persistent concerns on tighter US monetary policy. Gold climbed and was poised for the best week since mid January.
Some of the main moves in markets:
- The Stoxx Europe 600 rose 0.5% as of 8:26 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures fell 0.1%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 1.1%
- The MSCI Emerging Markets Index rose 0.8%
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.0621
- The Japanese yen rose 0.3% to 136.32 per dollar
- The offshore yuan rose 0.2% to 6.9039 per dollar
- The British pound rose 0.3% to $1.1980
- Bitcoin fell 4.4% to $22,380.92
- Ether fell 4.4% to $1,569.04
- The yield on 10-year Treasuries declined three basis points to 4.03%
- Germany’s 10-year yield declined two basis points to 2.73%
- Britain’s 10-year yield declined three basis points to 3.85%
- Brent crude was little changed
- Spot gold rose 0.4% to $1 843.59 an ounce