U.S. Futures Rise With Stocks as Fed Jitters Ease: Markets Wrap

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(Bloomberg) — U.S. equity futures climbed with European stocks on Monday as markets found their footing again following volatility spurred by the Federal Reserve’s surprise hawkishness.

Contracts on the S&P 500 advanced after the benchmark suffered its worst week since February on concerns over monetary policy. The Stoxx 600 Index also rebounded from an earlier loss, with U.K. grocer Wm Morrison Supermarkets Plc surging 32% after rejecting an unsolicited takeover bid, sending shares of peers Tesco Plc and J Sainsbury Plc higher.

Speculation that faster-than-expected policy tightening by the Fed will sink the reflation trade had sparked caution across markets. The 30-year U.S. Treasury yield briefly dropped below 2% for the first time since February. Asian markets slumped overnight, with the Nikkei 225 down 4% at one point.

But the risk-off mood faded throughout the European session, with the 30-year yield turning higher and a gauge of the dollar reversing an earlier gain. WTI crude oil rose to around $72 a barrel.

Traders will be paying close attention to this week’s appearances by Fed policy makers, including Chair Jerome Powell, for more guidance on a possible timeline for tapering asset purchases. Last week, officials sped up their expected pace of policy tightening amid optimism about the labor market and heightened concerns over price pressures in the recovery from the pandemic.

“We have another possibly two years before the Fed starts to take action,” John Woods, Asia Pacific chief investment officer at Credit Suisse Group AG, said on Bloomberg Television. “So I do anticipate there will be a period of choppy, sideways trading as the volatility associated with this debate in the Fed is reflected in pricing, but absolutely I take the view that yields will tick a little higher.”

Elsewhere, cryptocurrencies fell back, hurt by a general worsening of investor sentiment as well as China’s ongoing crackdown on Bitcoin mining and the prospect of tighter regulations elsewhere.

For more market commentary, follow the MLIV blog.

Here are some events to watch this week:

St. Louis Fed President James Bullard, Dallas Fed President Robert Kaplan and New York Fed President John Williams are among Fed speakers, as traders weigh up the central bank’s messaging shift, which has the potential to whiplash assetsEuropean Central Bank President Christine Lagarde addresses the European Parliament MondayFed Chair Jerome Powell testifies at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs TuesdayBank of England interest rate decision Thursday

These are some of the main moves in financial markets:

Stocks

Futures on the S&P 500 rose 0.5% as of 7:05 a.m. New York timeFutures on the Nasdaq 100 rose 0.5%Futures on the Dow Jones Industrial Average rose 0.6%The Stoxx Europe 600 rose 0.3%The MSCI World index fell 0.2%

Currencies

The Bloomberg Dollar Spot Index fell 0.2%The euro rose 0.3% to $1.1896The British pound rose 0.5% to $1.3882The Japanese yen was little changed at 110.14 per dollar

Bonds

The yield on 10-year Treasuries was little changed at 1.44%Germany’s 10-year yield was little changed at -0.20%Britain’s 10-year yield was little changed at 0.75%

Commodities

West Texas Intermediate crude rose 0.2% to $71.80 a barrelGold futures rose 0.8% to $1,783.50 an ounce

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