Log in to myFT Daily Digest to be the first to know about stock news.
European stock markets rose after Fed officials said the US economy had recovered enough from the pandemic to ease emergency financial measures, boosting stocks in sectors that benefited from GDP growth and higher interest rates.
The regional share index Stoxx 600 rose by 0.5 percent, the sub-index banks by 0.9 percent and energy producers by 1.4 percent. The UK’s FTSE 100 gained 0.6 percent, led by the same sectors.
Patrick Harker, head of the Philadelphia Federal Reserve, told Nikkei that “the markets are working well.” The US Federal Reserve’s bond purchases of $ 120 billion launched in March 2020
His comments came after Cleveland Fed chief Loretta Mester said Friday that the US economy had improved enough that asset purchases were slowing.
“The reflation trade indicators are all blinking green,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham, referring to a strategy of buying stocks in financial services companies that benefit from higher interest rates and other stocks in their assets the wealth coupled is economic growth.
After the Fed begins pulling back on stimulus spending, its next move could be to raise rates from a record low. Economists polled by the Financial Times expect the first increase in the next year.
Fund managers continued to buy stocks in this environment, Perdon said, believing stocks in multi-asset portfolios would outperform government bonds, whose yields have been kept low throughout the crisis. Wall Street and European stocks fell last week, but the Stoxx and the US S&P 500 index stayed near their all-time highs.
“The inflation data keeps coming through and that signals that the path for interest rates is higher,” he said.
“There’s still a push towards stocks because we see a bit of red every time [in stock markets] We believe this could be a trading opportunity to cushion potential losses in fixed income securities. ”
Tuesday’s data is expected to show US consumer price inflation to surpass 5 percent for the third straight month in August.
The 10-year US Treasury bond yield remained stable at 1.338 percent on Monday after rising on Friday as traders sold the bonds in response to US factory prices that rose faster than economists had predicted.
The dollar index, which measures the greenback against six major currencies, gained 0.2 percent. Brent crude, the oil benchmark, rose 0.7 percent to $ 73.46 a barrel. The euro lost 0.3 percent against the dollar to 1.1783 dollars.
The futures markets signaled that the S&P 500 would gain 0.5 percent on early New York deals, while the tech-driven Nasdaq 100 would rise 0.4 percent.
In Asia, Hong Kong’s Hang Seng index fell 1.5 percent after the Chinese government stepped up crackdown on the country’s tech sector to disband Alipay, an app with more than 1 billion users owned by Jack Ma’s Ant Group. The CSI 300 index of mainland China stocks lost 0.4 percent.