(Bloomberg) — European shares rose ahead of a widely expected interest rate cut by the European Central Bank, as markets reassessed their expectations for policy easing this year.
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Technology stocks led gains in the Stoxx 600 index after the sector sparked new all-time highs on Wall Street on Wednesday. U.S. stock futures held steady after the S&P 500’s record 25th record this year. Nvidia Corp., a major beneficiary of the boom in artificial intelligence investment, became the first computer chip company with a market capitalization of $3 trillion.
“After a lot of the optimism you see in the markets, technology still continues to lead the way,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management. “If you look at earnings revisions to see what’s working and what’s not, technology is leading.”
The focus will turn to the ECB later, as traders will look for guidance on the way forward for monetary policy, especially from President Christine Lagarde at the press conference. Views on additional rate cuts this year have become more cautious in the wake of data pointing to stronger-than-expected economic growth, inflation and wage increases.
As investors awaited Friday’s U.S. jobs report, a private payroll report on Wednesday showed corporate hiring grew at the slowest pace since the start of the year. Meanwhile, the services sector grew the most in nine months, driven by the largest monthly gain in business activity since 2021.
A Bloomberg index of global government bonds rose for a fifth straight session on Wednesday, its best performance since December, as traders stepped up bets on interest rate cuts. The dollar retreated as policymakers in Canada cut borrowing costs on Wednesday, increasing focus on the U.S. yield path.
“There is some more optimism about the Fed’s ability to cut rates in the second half of this year,” said Northwestern Mutual’s Stucky. “With the Bank of Canada cutting rates and the ECB expected to do so, the momentum behind a coordinated global easing cycle is starting to gain some traction.”
Treasury yields rose after falling the previous session, with markets almost fully pricing in two Federal Reserve rate cuts in 2024.
In Asia, shares rose for the first time in three days, with Indian shares posting gains after Prime Minister Narendra Modi received crucial support from two key allies in his coalition.
In Japan, the yen pared earlier gains after Bank of Japan board member Toyoaki Nakamura said it was appropriate to maintain current policy for now. The Japanese currency recovered from an overnight sell-off in what was a volatile week for the yen, thanks to its role in carry trades in emerging markets.
Elsewhere, Chinese property shares were on track to enter a technical bear market as doubts remained over Beijing’s efforts to strengthen the sector. A Bloomberg Intelligence gauge of the country’s developer stocks extended losses to about 20% from a high in mid-May.
In the commodities sector, oil prices rose for a second session as Saudi Arabia raised concerns about demand prospects with cuts in crude oil prices. Copper led a rally in industrial metal prices, rising 1.5%, while zinc and nickel also rose more than 1%.
Main events this week:
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Eurozone retail sales, ECB interest rate decision, Thursday
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First US unemployment claims, trading, Thursday
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Chinese trading, currency reserves, Friday
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Eurozone GDP, Friday
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U.S. unemployment rate, nonfarm payrolls, Friday
Some of the major moves in the markets:
Shares
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The Stoxx Europe 600 rose 0.6% as of 8:30 a.m. London time
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Futures on the S&P 500 were little changed
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Nasdaq 100 futures rose 0.1%
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index rose 0.8%
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The MSCI Emerging Markets Index rose 0.9%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro rose 0.1% to $1.0881
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The Japanese yen was little changed at 156.17 per dollar
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The offshore yuan was little changed at 7.2609 per dollar
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The British pound was little changed at $1.2794
Cryptocurrencies
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Bitcoin fell 0.5% to $70,894.4
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Ether fell 0.6% to $3,841.85
Bonds
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The yield on ten-year government bonds rose by two basis points to 4.30%
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The German ten-year yield was little changed at 2.52%
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The British ten-year yield rose by one basis point to 4.19%
Raw materials
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Brent crude rose 0.6% to $78.89 per barrel
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Spot gold rose 0.4% to $2,365.63 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Matthew Burgess and Toby Alder.
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