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Stocks, US Futures Extend Rally as Dollar Tumbles: Markets Wrap

European stocks and US futures extended a rally and the dollar retreated as traders bet inflation is near peaking even as policy makers ramp up hawkish rhetoric.

The Stoxx Europe 600 index climbed for a third day, with retailers and miners leading the advance and all major regional benchmarks in the green. Futures on the S&P 500 and Nasdaq 100 rose, suggesting US stocks may add to last week’s gains. Treasury yields ticked lower. Crude oil turned higher along with industrial metals.

A gauge of the dollar fell for a second day, on track for its biggest two-day drop in almost three months, as all G-10 peers surged expect the yen. The euro jumped the most in six months after Bundesbank President Joachim Nagel signaled support for further interest-rate hikes in Europe, while news of Ukrainian gains in the war against Russia also boosted sentiment. Sweden’s krona soared 1.7% as a coalition of right-wing parties looks set to secure a narrow victory in a general election.

Investor focus is on August US inflation data due Tuesday, with headline CPI expected to cool to an 8% a year pace while the core measure that excludes food and energy is seen accelerating. Traders almost fully expect another jumbo-sized Fed hike next week, following two 75-basis-point increases, and forward guidance by Fed officials has supported that view.

“A downside surprise in US CPI is likely more of a concern and that could see the dollar weakening further,” Charu Chanana, a strategist at Saxo Capital Markets, said on Bloomberg Television. “That could potentially be a risk to watch.”

Hawkish remarks from Fed officials and recession worries have driven equities close to oversold levels before last week’s rebound. The Levkovich Index, a sentiment gauge, fell to -16, a hair away from the -17 level that defines panic. Bank of America Corp.’s bull-and-bear indicator slid to the “maximum bearish” level — often seen as a contrarian buy signal.

Fed Governor Christopher Waller said he favors “another significant” increase in interest rates when the central bank meets later this month, signaling his backing for a 75 basis-point move. Fed Bank of St. Louis President James Bullard said he was leaning “more strongly” toward a third straight boost of that magnitude, while his Kansas City counterpart Esther George noted officials have a “clear-cut” case for continuing to remove monetary support.

“Should tomorrow’s CPI data show a notable moderation in price pressures, the market’s defiance of the Fed’s forward guidance may gain some support, to the benefit of relatively higher-risk assets,” Rand Merchant Bank economists said in a note Monday. “Having said that, the risk remains that the Fed sticks to its hawkish guns as inflation may remain well above levels that it is comfortable with for a prolonged period of time, meaning it may still be premature to bet against further US dollar strength at this time.”

Markets also have to digest the implications of Ukraine’s counter-offensive, after its forces continued their rapid advance in the Kharkiv region, exploiting a retreat of Russian defenses.  

 Here are some key events to watch this week:

  • US CPI, Tuesday
  • UK CPI, Wednesday
  • US PPI, Wednesday
  • US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
  • China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
  • Euro area CPI, Friday
  • US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:


  • The Stoxx Europe 600 rose 0.9% as of 10:15 a.m. London time
  • Futures on the S&P 500 rose 0.6%
  • Futures on the Nasdaq 100 rose 0.7%
  • Futures on the Dow Jones Industrial Average rose 0.5%
  • The MSCI Asia Pacific Index rose 0.7%
  • The MSCI Emerging Markets Index rose 0.7%


  • The Bloomberg Dollar Spot Index fell 0.6%
  • The euro rose 1.4% to $1.0181
  • The Japanese yen fell 0.2% to 142.73 per dollar
  • The offshore yuan rose 0.4% to 6.9127 per dollar
  • The British pound rose 0.8% to $1.1684


  • The yield on 10-year Treasuries declined two basis points to 3.29%
  • Germany’s 10-year yield was little changed at 1.69%
  • Britain’s 10-year yield was little changed at 3.09%


  • Brent crude rose 1% to $93.73 a barrel
  • Spot gold rose 0.6% to $1,726.40 an ounce

Source By: Bloomberg