European stocks rise in wake of S&P: Markets Wrap

(Bloomberg) — European stocks rose slightly after the S&P 500 closed at a new record high on Friday, as optimism about possible interest rate cuts by the Federal Reserve and investors looked forward to a key update on U.S. inflation.

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Interest-sensitive real estate stocks led to broad gains in almost all industry groups in Europe. Shares in Italian luxury brand Tod SpA rose as much as 18% after its founding family announced it had hired buyout firm L Catterton in a new attempt to take the company private.

U.S. stock futures remained in tight ranges after the S&P 500 closed above 5,000 for the first time on Friday, driven by a renewed rally in big technology companies. Treasuries and the dollar were steady after closing out a sixth week of gains, their longest winning streak since early September.

Tuesday's inflation report is the biggest event of the week for markets as traders look for clues about the timing of an initial Fed rate cut. Annual U.S. inflation is expected to have fallen to 2.9% in January from 3.4% in the previous month, according to consensus estimates from economists surveyed by Bloomberg. That would be the first value below 3% since March 2021.

“January CPI numbers are expected to be weaker compared to December, but with Fed officials sticking to a cautious pattern of late, it's hard to believe this week's CPI will change the recent news said Paul Mackel, head of global FX research at HSBC Bank Plc. “One would think that many within the Fed would be in favor of a strong dollar to support the inflation process.”

Swap markets suggest the Fed will make just four rate cuts in 2024, fewer than the seven rate cuts forecast late last year and only slightly more than the three rate cuts envisioned by policymakers.

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“Market pricing attempts to encourage central banks to lower interest rates. The market has arguably been excessive in its encouragement of late,” Iain Stealey, international chief investment officer of fixed income at JP Morgan Asset Management, wrote in a note to clients. “Employment remains strong, purchasing managers’ surveys are positive and economic growth is robust.”

In Asia, trading levels were subdued on Monday as many markets were closed for the Lunar New Year holiday. Stocks in Australia, New Zealand, India and the Philippines fell due to a lack of guidance in the region. Markets such as Japan, China, Hong Kong, Singapore, Taiwan and South Korea were all closed.

The yen remained near a two-month low hit on Friday after central bankers said the Bank of Japan would take its time raising interest rates. Japan's currency has depreciated against all other Group of 10 currencies this year.

In commodities, oil prices fell after last week's push. Iran's foreign minister said the war in Gaza could be moving closer to a diplomatic solution.

Important events this week:

• Indian CPI, Monday

• Minneapolis Fed President Neel Kashkari, Fed Governor Michelle Bowman and Fed President Tom Barkin speak Monday

• ECB board member Piero Cipollone and chief economist Philip Lane will speak on Monday

• US CPI, Tuesday

• Unemployment in Britain, Tuesday

• Japanese producer prices, Tuesday

• British inflation, Wednesday

• Eurozone GDP, industrial production, Wednesday

• Presidential election in Indonesia, Wednesday

• Bank of England Governor Andrew Bailey speaks on Wednesday

• ECB Council member Boris Vujcic and Vice President Luis de Guindos speak

• Chicago Fed President Austan Goolsbee speaks on Wednesday

• Jobs in Australia, Thursday

• Japan's GDP, Thursday

• British GDP, Thursday

• US initial jobless claims, retail sales, Thursday

• The Philippine central bank's interest rate meeting on Thursday

• ECB President Christine Lagarde speaks on Thursday

• Fed Governor Christopher Waller speaks on Thursday

• Bank of England policymakers Catherine Mann and Megan Green speak on Thursday

• Construction starts in the USA, producer prices, Friday

• San Francisco Fed President Mary Daly and Fed Vice Chairman for Supervision Michael Barr speak Friday

Some of the key moves in the markets:

Shares

• The Stoxx Europe 600 was up 0.3% at 9:03 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures were little changed

• Futures on the Dow Jones Industrial Average fell 0.2%

• The MSCI Asia Pacific Index was hardly changed

• The MSCI Emerging Markets Index was hardly changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0775

• The Japanese yen was little changed at 149.16 per dollar

• The offshore yuan was little changed at 7.2173 per dollar

• The British pound was little changed at $1.2624

Cryptocurrencies

• Bitcoin was little changed at $48,107.27

• Ether fell 0.6% to $2,489.03

Tie up

• The yield on 10-year government bonds remained little changed at 4.18%

• The yield on 10-year German government bonds fell by one basis point to 2.37%

• The 10-year UK government bond yield fell one basis point to 4.08%

raw materials

This story was produced with support from Bloomberg Automation.

– With support from Robert Brand and Sagarika Jaisinghani.

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