Dollar Sinks to 15-Month Low in Risk-On Mood: Markets Wrap

(Bloomberg) — The risk-on mood in markets stretched into another day as U.S. futures rose and the dollar weakened to a 15-month low.

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European stocks held on to gains from yesterday’s rally, which saw the Stoxx 600 Index rise 1.5%. Swatch Group AG, the maker of Omega and Longines watches, rallied nearly 6% as the reopening of China boosted profits. Watches at Switzerland Group Plc, the UK’s biggest retailer of Rolex watches, rose 10%.

Investors were still reacting to data released Wednesday that showed the U.S. inflation rate fell to a two-year low, easing concerns over higher interest rates and a potential slowdown. retreat. A report on US producer prices is due later today and is expected to show a decline from a year ago, according to the median estimate of economists polled by Bloomberg.

“Since last summer, producer prices have benefited from loosening supply chains and declining commodity prices,” wrote Bloomberg Economics’ Jonathan Church. “With ongoing disinflation in pipeline goods, this trend is expected to continue.”

The MSCI Asia Pacific Index headed to its highest close in more than three weeks, with Hong Kong stocks recording some of the biggest gains. Chinese Premier Li Qiang met with senior executives from companies including Alibaba Group Holding Ltd.

Some top money managers said the dollar was poised for further losses as US exceptionalism waned.

“The recent USD underperformance reflects a qualitative shift in the market’s comfort with the USD short as the terminal Fed policy rate appears to be converging,” said Steven Englander, head of global G-10 FX research and North America. strategy for Standard Chartered Bank, wrote in a note.

The story continues

Bond yields are lower. The yield on two-year Treasuries, which is more sensitive to impending policy moves, fell around six basis points to 4.68% after sliding 13 basis points on Wednesday in inflation data.

The US consumer price index fell to 3% in June year-over-year, from 4% in May. The core measure – which economists see as a better indicator of underlying inflation – fell to 4.8%, the lowest since 2021. Meanwhile traders are predicting the Fed will pursue another rate hike today month, the tendency for further increases appears to be retreating.

Brandywine Global Investment Management expects the Fed to tighten by 25 basis points this month and then stop. “We’ve moved beyond that kind of crisis mentality around inflation,” portfolio manager Jack McIntyre told Bloomberg Television. “The rhetoric coming from the Fed post-FOMC should be less hawkish.”

Main events this week:

• Eurozone industrial production, Thursday

• Initial US jobless claims, PPI, Thursday

• US University of Michigan consumer sentiment, Friday

• US banks start earnings, Friday

Some of the main steps in the markets:

Stocks

• The Stoxx Europe 600 rose 0.1% at 8:29 am London time

• S&P 500 futures rose 0.2%

• Nasdaq 100 futures rose 0.4%

• Dow Jones Industrial Average futures were little changed

• The MSCI Asia Pacific Index rose 1.6%

• The MSCI Emerging Markets Index rose 1.4%

Money

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro was little changed at $1.1140

• The Japanese yen was little changed at 138.48 per dollar

• The offshore yuan was little changed at 7.1723 per dollar

• The British pound rose 0.2% to $1.3013

Cryptocurrencies

• Bitcoin rose 0.2% to $30,408.85

• Ether was little changed at $1,872.76

Bonds

• The yield on 10-year Treasuries fell three basis points to 3.83%

• Germany’s 10-year yield fell seven basis points to 2.51%

• Britain’s 10-year yield fell six basis points to 4.46%

Commodities

• Brent crude rose 0.3% to $80.47 a barrel

• Spot gold rose 0.1% to $1,960.19 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Ruth Carson and Tassia Sipahutar.

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