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Stocks Extend Their Rally as Investor Angst Eases: Markets Wrap

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(Bloomberg) — Stocks extended a rebound as the UK’s efforts to foster greater stability in its volatile bond market buoyed sentiment toward riskier assets.

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European stocks extended gains for a fourth day, while US equity futures advanced by about 1.5% after the S&P 500 closed above a key technical support level on Monday. A gauge of Asian equities rose, led by technology stocks in Hong Kong.

A Bloomberg gauge of the greenback pared declines and the pound fluctuated following a Financial Times report that the Bank of England was likely to delay the sale of government bonds after the UK’s botched fiscal plan roiled markets. Treasury yields dropped.

Risk assets have recovered in recent days as investors focused on earnings, cheaper valuations enticed buyers and concerns about UK assets were soothed. Still, with lingering concerns over inflation, the economy and hawkish central banks, 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. said. “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.”

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.

China’s decision to delay the publication of key economic data including third-quarter gross domestic product added a touch of caution to Asian trading. The Communist Party congress has provided few signs of a let up in China’s Covid-zero and property-market policies that are weighing on the economy.

Government bond yields in New Zealand bucked the broader trend, rising with the country’s currency after inflation data remained stronger than expected. The figures underscored risks to markets from persistently high consumer prices even in countries at the vanguard in tightening monetary policy.

In contrast with the broadly positive mood in equities, JPMorgan Chase & Co.’s Marko Kolanovic said he was trimming risk allocations in the bank’s model portfolio as he grew more cautious about economic and market recoveries.

The latest US recession probability models by Bloomberg economists Anna Wong and Eliza Winger forecast a higher probability of such an event across all time frames — with the 12-month estimate of a downturn by October 2023 hitting 100%. That’s up from 65% for the comparable period in the previous update.

Elsewhere in markets, oil rose as investors weighed signs of a tight market against 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 0.6% as of 8:24 a.m. London time

  • Futures on the S&P 500 rose 1.4%

  • Futures on the Nasdaq 100 rose 1.7%

  • Futures on the Dow Jones Industrial Average rose 1.2%

  • The MSCI Asia Pacific Index rose 1.2%

  • The MSCI Emerging Markets Index rose 1.2%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $0.9837

  • The Japanese yen was little changed at 149.01 per dollar

  • The offshore yuan was little changed at 7.2042 per dollar

  • The British pound fell 0.4% to $1.1316

Cryptocurrencies

  • Bitcoin rose 0.3% to $19,585.95

  • Ether rose 0.2% to $1,332.47

Bonds

  • The yield on 10-year Treasuries declined one basis point to 4.00%

  • Germany’s 10-year yield advanced four basis points to 2.31%

  • Britain’s 10-year yield advanced one basis point to 3.99%

Commodities

  • Brent crude rose 0.5% to $92.05 a barrel

  • Spot gold rose 0.1% to $1,651.91 an ounce

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