[1/3] Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. April 10, 2023. REUTERS/Brendan McDermid
NEW YORK/LONDON, June 12 (Reuters) – Global equities gained ground to reach their highest level in more than a year on Monday, while US Treasury yields and the dollar remained virtually unchanged ahead of key US inflation readings and rate decisions later this year. week of the US Federal Reserve and other central banks.
The dollar made little progress as investors turned to riskier assets, with the Fed widely expected not to raise rates on Wednesday for the first time since January 2022.
However, the oil price fell about 4% and Brent oil futures closed at their lowest level since December 2021 on concerns about weak demand and rising global inventories, while uncertainty about price and inflation data added to the concerns.
Investors will closely monitor US consumer price index (CPI) data, to be released on Tuesday, and producer price index data, to be released on Wednesday, to see how well the Fed’s tightening cycle has managed to curb high inflation.
The benchmark S&P 500 (.SPX) closed at its highest level since April 2022, after rising 20% last week from its October 12 low, marking the beginning of a new bull market, as defined by some market participants.
The stock index’s gains partly reflected expectations for a Fed tightening pause and for CPI and PPI to come in lower than the previous month, asset managers and strategists said.
“Investors have been looking for a pause from the Fed in the cycle of rate hikes since they began more than a year ago. They are trying to get ahead of that,” said Burns McKinney, portfolio manager, NFJ Investment Group in Dallas.
In particular, McKinney saw an outperformance of rate-sensitive growth sectors such as technology (.SPLRCT) on Monday as bets that low inflation would give the Fed the green light to stop rate hikes, at least at this week’s meeting.
The Dow Jones Industrial Average (.DJI) rose 189.55 points, or 0.56%, to 34,066.33, the S&P 500 (.SPX) gained 40.07 points, or 0.93%, to 4,338.93.
The tech-heavy Nasdaq Composite (.IXIC) added 202.78 points, or 1.53%, to 13,461.92 in its biggest one-day percentage gain since May 26.
MSCI’s measure of equities around the world (.MIWD00000PUS) gained 0.66% to reach its highest level since April 2022 on its third consecutive day of gains.
Traders are pricing in about a 75% chance that the Fed will hold rates steady, and a 25% chance of a rate hike of 25 basis points, according to the CME FedWatch Tool.
While the Fed is expected to hold rates steady, surprise rate hikes by the Reserve Bank of Australia and Bank of Canada last week still kept investors alert to the idea of extended tightening cycles.
The European Central Bank will announce its interest rate decision on Thursday, with analysts expecting it to raise rates by 25 basis points (bps) and indicating that there is more ground to cover. But the Bank of Japan, announcing its plan Friday, is expected to maintain its ultra-loose policy.
In currencies, the dollar index, which measures the greenback against a basket of major currencies, rose 0.087%, with the euro rising 0.08% to $1.0756.
The Japanese yen weakened 0.15% against the greenback at $139.57, while Sterling last traded at $1.2509, down 0.48% on the day.
While it is more likely than not that the Fed will ‘skip’ a hike this month, it seems no one wants to be caught on the wrong side of the market if they choose to hike this month, driving volatility across most markets. majors remains low.” said Helen Given, FX trader, at Monex USA in Washington.
Given said a rate hike by the Fed would “likely be very positive for the dollar because it would go against current market expectations.”
In US Treasuries, benchmark 10-year notes fell 0.7 basis points to 3.738%, from 3.745% late Friday. The 30-year bond last fell 0.8 basis points to yield 3.8786%, while the 2-year bond last fell 2.3 basis points to yield 4.5813%.
As traders waited for central bank decisions and worried about weak Chinese demand and rising Russian supply, US crude fell 4.35% to $67.12 a barrel and Brent to $71.84, down from 3.94% on the day itself.
Reporting by Sinead Carew, Gertrude Chavez-Dreyfuss, Elizabeth Howcroft; Edited by Andrew Heavens, Nick Zieminski and Lisa Shumaker