Stocks headed for their best week of the year after a raft of central bank meetings indicated that a pivot toward looser policy is on track.
MSCI Inc.’s global gauge of shares climbed more than 2% in the week so far, while the S&P 500 was poised for a 2.4% advance, the most since mid December. Europe’s stock benchmark headed for its longest weekly run of gains in more than a decade. Treasuries rose for a fourth day, taking the 10-year yield almost 10 basis points lower since Monday.
Investor appetite has been rekindled since the Federal Reserve meeting midweek fueled hopes policymakers will engineer a soft landing for the US economy with three interest rate cuts this year. A surprise loosening by the Swiss National Bank and a more dovish stance by Bank of England policymakers added to the optimism, lifting equities and government bonds while driving their currencies lower.
“The likelihood of a recession fading provides impetus for stronger markets,” said Max Wolman, an investment director at abrdn in London. “Investors were too bullish on rate cuts by the Fed, this has now been priced out and the market sees three cuts this year as more realistic.”
In Friday’s session, Europe’s Stoxx 600 gauge posted small moves, while US futures edged higher. Lululemon shares slid 12% in premarket trading after the activewear maker warned of a slowdown in US store visits. European sportswear retailers Adidas, Puma and JD Sports fell after Nike said sales will take a hit as it realigns merchandise to better match shoppers tastes.
Dollar Strength
The dollar extended its gains against major peers, rising 0.3% and headed for its best week in two months. Despite the expectations for Fed cuts, the dollar has scope to gain due to weakness for the Japanese yen and the Chinese yuan, while the SNB’s surprise cut has boosted speculation other major central banks may move faster than the Fed to reduce their policy rates.
China’s yuan breached a closely watched technical level. The People’s Bank of China lowered the daily reference rate by the most since early February, a sign to some that Beijing is greenlighting more depreciation amid a bumpy economic recovery.
The yen was little changed, trading around 152 per dollar as Japan’s inflation accelerated to the quickest pace in four months. Markets will stay focused on whether the Bank of Japan might follow its first interest rate hike since 2007 — which it delivered earlier in the week — with further increases later this year.
Meanwhile, oil held a two-day drop, with traders assessing the outlook for global interest rates and geopolitical tensions in the Middle East. Elsewhere, Bitcoin traded around $66,000, while gold fell after surging above $2,200 an ounce for the first time.
Key events this week:
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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