(Bloomberg) -- US equity futures signalled a turnaround after a rout that erased nearly $2 trillion from the S&P 500 last week. Treasuries retreated.
Contracts on the S&P 500 and Nasdaq 100 each added 1.5% before the start of trading in New York following the long weekend. Apple Inc. and Microsoft Corp. climbed in the premarket while Revlon Inc. surged as much as 27% before paring back gains in the wake of its Chapter 11 bankruptcy filing. The drop in Treasuries took the benchmark 10-year yield back toward 3.3%.
Sentiment this week is being helped by comments from President Joe Biden that a US recession isn’t “inevitable,” but the outlook remains parlous for investors weighing whether the market has bottomed. History suggests bear markets usually take time to find a floor, especially when they are accompanied by a recession, as happened in 2008’s financial crisis.
“Even if the mid-term investing landscape remains blurry to most market operators at the beginning of this summer season, some investors looking for opportunities to buy shares at a discounted price have been reassured,” said Pierre Veyret, a technical analyst at ActivTrades. “The fact central banks are moving quickly towards a super hawkish stance in order to tame inflation is also perceived as good news by some.”
After unexpectedly accelerating to a fresh 40-year high in May, US consumer price growth is seen slowing, with a Bloomberg survey of economists predicting 6.5% by the fourth quarter and to 3.5% by the middle of next year.
Yet fears are rampant that Federal Reserve policy makers intent on cooling price pressures will go too far and trigger an economic slowdown. Strategists at Morgan Stanley and Goldman Sachs Group Inc. warned equities may have further to fall to fully price in the risk of recession, reflecting wider skepticism about Tuesday’s rebound.
“We think equities will struggle to rebound sustainably until earnings expectations reset lower and/or central banks turn more dovish, which seems unlikely for now,” said Emmanuel Cau, head of European equity strategy at Barclays Plc.
The S&P 500 is set for an 11% drop in June, poised for the worst month since March 2020, which marked the lows of the pandemic selloff.
Elsewhere, crude oil gained. Bitcoin scaled $21,000 as cryptocurrencies got a reprieve from recent turbulence. The dollar dipped and the yen hovered near a 24-year low, sapped by the contrast between a super-dovish Bank of Japan and a hawkish Fed.
European stocks extended a second day of gains, with automakers leading the advance in the benchmark Stoxx 600 Index.
How will the second half of this year play out for major asset classes? We are re-running MLIV’s 2022 asset survey from December to see how street views have evolved amid the turmoil and volatility in the past few months. Click here to participate anonymously.
What to watch this week:
- Fed Chair Jerome Powell semi-annual Senate testimony, Wednesday
- Bank of Japan April minutes, Wednesday
- Powell US House testimony, Thursday
- US initial jobless claims, Thursday
- PMIs for Eurozone, France, Germany, UK, Australia, Thursday
- ECB economic bulletin, Thursday
- US University of Michigan consumer sentiment, Friday
- RBA’s Lowe speaks on panel, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 1.5% as of 9:06 a.m. New York time
- Futures on the Nasdaq 100 rose 1.6%
- Futures on the Dow Jones Industrial Average rose 1.4%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.4% to $1.0556
- The British pound rose 0.2% to $1.2276
- The Japanese yen fell 0.8% to 136.21 per dollar
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.28%
- Germany’s 10-year yield advanced two basis points to 1.77%
- Britain’s 10-year yield advanced three basis points to 2.63%
Commodities
- West Texas Intermediate crude rose 1.6% to $111.33 a barrel
- Gold futures were little changed
More stories like this are available on
©2022 Bloomberg L.P.
