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Stocks stage small bounce as investors weigh cenbanks' next moves

Stock Markets Jun 20, 2022 07:06AM ET
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2/2 © Reuters. FILE PHOTO: People pass by an electronic screen showing Japan's Nikkei share price index inside a conference hall in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato 2/2

By Tommy Wilkes

LONDON (Reuters) - Stock markets chalked up modest gains on Monday after last week's hefty losses as investors braced for a host of U.S. Federal Reserve speakers this week, where they could underline a commitment to fight inflation whatever rate pain required.

Trading was thinned by a U.S. holiday.

The euro was little moved after French President Emmanuel Macron lost control of the National Assembly in an on Sunday, a major setback that could throw the country into political paralysis. However, French government bond yields rose, a sign of investor nervousness.

The Euro STOXX was last up 0.5%. Germany's DAX gained 0.43%, while French shares underperformed slightly but were still 0.25% higher despite Macron's electoral setbacks.

Holger Schmieding, an economist at Berenberg, said Macron's party would now have to learn the art of compromise to push ahead with its policies.

"As most Republicans and other mainstream forces in France are less interested in strengthening European integration than Macron, his ability to shape and promote the European agenda will be even more limited than before," he said.

Nasdaq futures climbed 0.78% while S&P 500 futures rallied 0.69%.

The bounce in futures markets follows the S&P 500 falling almost 6% last week to trade 24% below its January high.

In Asia, shares fell on Monday. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.1% and Tokyo's Nikkei 0.74%.

Chinese blue chips increased 0.5%, aided by news President Joe Biden was considering removing some tariffs on China.

The focus on the path for interest rates and inflation is likely to dominate markets this week.

A series of central bank hikes last week, including a surprise move by the Swiss National Bank, will be followed by more tightening as policymakers try to tame soaring prices - investors predict heightened volatility until there is some clarity on a peak in inflation and central bank policy tightening.

Relief seems unlikely this week with British inflation figures expected to show another alarmingly high reading that could push the Bank of England into hiking at a faster pace.

A number of central bankers are also on the speaking calendar this week, led by a likely hawkish testimony from Federal Reserve Chair Jerome Powell's to the U.S. House of Representatives on Wednesday and Thursday.

Graphic: Expectations of higher U.S. rates have soared, https://fingfx.thomsonreuters.com/gfx/mkt/zjpqklegqpx/Pasted%20image%201655476819989.png

"Markets are still digesting the higher re-pricing of Fed rate expectations, and global risk assets may struggle to show any sustainable rebound for now. All this should keep the dollar mostly in demand in a week where markets will focus on Powell's testimony," ING analysts said in a note.

UNCONDITIONAL

The Fed last week vowed its commitment to containing inflation was "unconditional", while Fed Governor Christopher Waller said on Saturday he would support another hike of 75 basis points in July.

"Financial conditions are likely to tighten further, consumers are experiencing a significant negative sentiment shock, energy and food supply disruptions have worsened and the outlook for foreign growth has deteriorated," warned analysts at Nomura, saying a mild recession in the fourth quarter is more likely than not.

The dollar had strengthened broadly on the hawkish outlook and the dollar index last traded at 104.37. Though that was down 0.3% on the day it was still not far from last week's two-decade high of 105.790.

The euro rose 0.3% to $1.0526, helped by investors focusing on the European Central Bank tools to fight a widening of bond spreads between members of the currency bloc. The single currency, however, was still close to last week's trough at $1.0357.

The yen has been under broad pressure as the Bank of Japan stuck doggedly to its super-easy policies. It gained slightly on the dollar on Monday to 134.90 yen, having reached its lowest since 1998 last week.

After massive moves last week, government bond markets were generally calmer.

Bitcoin recovered earlier losses to trade little changed at $20,580, having bounced sharply over the weekend amid talk of a single large buyer.

Oil prices edged lower again after a sharp retreat late last week amid concerns a global recession would curb demand. [O/R]

Brent weakened 0.25% to $112.84, while U.S. crude lost 0.05% to $109.5 per barrel.

Stocks stage small bounce as investors weigh cenbanks' next moves
 

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Comments (9)
Ansari Abdullah
Ansari Abdullah Jun 20, 2022 2:26PM ET
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super market hai
Kerry Ditto
Kerry Ditto Jun 20, 2022 1:08AM ET
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Asia markets, it's for the times to get better.
Francis Lim Wei
Francis Lim Wei Jun 20, 2022 1:08AM ET
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it's not possible because we are in a middle of a world recession all trades and markets are interconnected somehow through the fed fund rates
Francis Lim Wei
Francis Lim Wei Jun 20, 2022 1:08AM ET
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any rallies is short-lived with no fundamental backing
neang aee 냥에
neang aee 냥에 Jun 20, 2022 12:57AM ET
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Waiting for Black Friday, Soon.
Francis Lim Wei
Francis Lim Wei Jun 20, 2022 12:57AM ET
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hopefully it will be very black , a black hole Friday that swallows every thing
S K
S K Jun 20, 2022 12:45AM ET
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Yup Stocks will freefall soon. It's coming
Robert Palumbo
Robert Palumbo Jun 20, 2022 12:45AM ET
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They already did,plus this is all fabricated everyone knows it
Steffen vdm
Steffen vdm Jun 20, 2022 12:45AM ET
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if it's fabricated it's another reason to go down. People like you (and many, many others) thinking we can buy shares cheaply. And then the man with the hammer comes, wiping out billions. And guess where that will be going. Not the average person
Kerry Ditto
Kerry Ditto Jun 19, 2022 11:48PM ET
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4 rally factors for stocks. Oil prices fall, bond yields fall, bitcoin price rising, so stock futures had to rise. Even lagging indicator, Asia stock prices seem ready to join the rally mode.
Jimothy Bobbins
Jimothy Bobbins Jun 19, 2022 11:33PM ET
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Asia is literally up rn are you guys autistic?
Steffen vdm
Steffen vdm Jun 19, 2022 11:33PM ET
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An autistic person would not ignore the facts and make this error, believe me. In fact, he/she would give you a perfect analysis of what happened overnight. I can recommend having autistic people in your company
Jun 19, 2022 11:25PM ET
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The federal reserve cannot raise rates. The US government has 30.6 trillion in debt. Good luck
Kerry Ditto
Kerry Ditto Jun 19, 2022 11:09PM ET
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Come together, right now. Oil prices falling, bond yields falling, stock futures rising. Asia markets are irrelevent until they come together.
Kelly Mayer
Kelly Mayer Jun 19, 2022 10:27PM ET
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Market is princing a recession. Behaviour will change. No recession will come. S&P above 5000 by years end in an epic rally starting late October.
 
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