Equities heading to fifth weekly gain following Fed comments

Equities held gains after the Federal Reserve validated bets that it will soon move to easier policy and pushed stock market gauges toward all-time highs.

The Stoxx 600 index rose 0.4% after hitting its highest level since January 2022, on course for a fifth week of gains. S&P 500 futures ticked up 0.3% with the underlying gauge poised for its seven consecutive weekly advance. 

The Fed ignited a speculative frenzy this week when it affirmed soft-landing bets that it was ready to declare victory on inflation and shift to rate cuts. 

As the week draws to a close, traders still have to contend with the year’s largest quarterly options and futures expiry Friday and its potential to spark volatility. A staggering $3.1 trillion in notional open interest scheduled to either expire or be rolled into the new year, according to according to Tier1Alpha strategists. 

A note of caution from Europe’s central bankers that they’re not ready to follow the Fed’s policy pivot damped some of the excitement. European Central Bank Governing Council member Madis Muller said Friday that markets are getting ahead of themselves in betting that the ECB will start cutting interest rates in the first half of next year. 

“The contrast between the resilient US economy adopting a dovish stance and faltering European economies holding on to a hawkish position gives the impression that something is amiss,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note to clients.

Treasuries were steady after the yield on the 10-year benchmark broke below 4% for the first time since August. The dollar traded in tight range against Group-of-10 peers. 

Elsewhere, oil was set to post its first weekly gain in almost two months as the Fed’s latest stance triggered a bullish pulse across markets. Gold also headed for a weekly advance.

Key events this week:

• Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday
• US industrial production, Empire manufacturing, S&P Global US Manufacturing PMI, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.4% as of 9:59 a.m. London time
• S&P 500 futures rose 0.3%
• Nasdaq 100 futures rose 0.3%
• Futures on the Dow Jones Industrial Average rose 0.3%
• The MSCI Asia Pacific Index rose 1%
• The MSCI Emerging Markets Index rose 0.9%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.3% to $1.0961
• The Japanese yen was little changed at 141.77 per dollar
• The offshore yuan rose 0.2% to 7.1094 per dollar
• The British pound was little changed at $1.2775

Cryptocurrencies

• Bitcoin fell 0.4% to $42,824.38
• Ether fell 1% to $2,276.49

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.91%
• Germany’s 10-year yield declined eight basis points to 2.04%
• Britain’s 10-year yield declined four basis points to 3.74%

Commodities

• Brent crude rose 0.3% to $76.84 a barrel
• Spot gold rose 0.3% to $2,042.81 an ounce

This story was produced with the assistance of Bloomberg Automation.