Stocks Pare Gain; Pound, Gilts Drop on BOE Comment: Markets Wrap

(Bloomberg) — Stocks trimmed their advance and the pound and UK gilts weakened after the Bank of England said a report that it is likely to delay the sale of government bonds until the market has calmed was inaccurate.

Most Read from Bloomberg

European stocks pared a fourth day of gains. US equity futures were still more than 1% higher, after the S&P 500 closed above a key technical support level on Monday. Amazon.com Inc. and Microsoft Corp. led major technology and internet stocks higher in New York premarket trading on Tuesday.

A Bloomberg gauge of the greenback steadied, while the pound weakened after the BOE denied a Financial Times report saying the central bank is delaying the start of its program of gilt sales. The yield on Britain’s 10-year bond rose six basis points to 4.03%. Treasury yields edged higher.

The BOE’s comment took some of the steam out of a recovery in risk assets as investors assessed positive company results, cheaper valuations enticed buyers and as concerns about UK assets were soothed. With the headwinds of inflation, risks to the economy and hawkish central banks persisting, there’s debate over how durable the gains will prove.

“There’s still a strong feeling of a bear market rally about trading over the course of the last week,” said Craig Erlam, senior market analyst at Oanda Europe Ltd. “The economic landscape looks treacherous and we don’t even know if we’re at peak inflation and interest rate pricing yet. Those are substantial headwinds that will make any stock market rebound extremely challenging.”

Bank of America Corp. said sentiment on stocks and global growth among fund managers it surveyed shows full capitulation, opening the way to an equities rally in 2023. The bank’s monthly global fund manager survey “screams macro capitulation, investor capitulation, start of policy capitulation,” strategists led by Michael Hartnett wrote in a note on Tuesday. They expect stocks to bottom in the first half of next year after the Federal Reserve finally pivots away from raising interest rates.

Story continues

The yen paused in its run toward the closely watched 150 per dollar level, which has investors on high alert for possible intervention. Japanese Finance Minister Shunichi Suzuki said he was watching market moves with a sense of urgency.

A gauge of Asian equities rose, led by technology stocks in Hong Kong, even as China’s decision to delay the publication of key economic data added a touch of caution to trading in the region.

Elsewhere in markets, oil gave up its gains amid concerns over a global economic slowdown. Gold edged higher and Bitcoin continued to trade below $20,000.

Key events this week:

  • US industrial production, NAHB housing market index, Tuesday

  • Fed’s Neel Kashkari speaks, Tuesday

  • Euro area CPI, Wednesday

  • EIA crude oil inventory report, Wednesday

  • US MBA mortgage applications, building permits, housing starts, Fed Beige Book, Wednesday

  • Fed’s Neel Kashkari, Charles Evans, James Bullard speak, Wednesday

  • US existing home sales, initial jobless claims, Conference Board leading index, Thursday

  • Euro area consumer confidence, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.5% as of 10:20 a.m. London time

  • Futures on the S&P 500 rose 1.1%

  • Futures on the Nasdaq 100 rose 1.3%

  • Futures on the Dow Jones Industrial Average rose 0.9%

  • The MSCI Asia Pacific Index rose 1.3%

  • The MSCI Emerging Markets Index rose 1.3%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $0.9843

  • The Japanese yen was little changed at 148.95 per dollar

  • The offshore yuan was little changed at 7.2088 per dollar

  • The British pound fell 0.4% to $1.1312

Cryptocurrencies

  • Bitcoin was little changed at $19,542.45

  • Ether fell 0.4% to $1,324.95

Bonds

  • The yield on 10-year Treasuries advanced one basis point to 4.03%

  • Germany’s 10-year yield advanced six basis points to 2.33%

  • Britain’s 10-year yield advanced seven basis points to 4.05%

Commodities

  • Brent crude fell 0.6% to $91.07 a barrel

  • Spot gold rose 0.1% to $1,651.93 an ounce

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.