(Bloomberg) — Equities erased early gains ahead of the Federal Reserve’s policy meeting Wednesday. A gauge of the dollar fell and gold rose.
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European stocks and US futures were little changed after euro-area manufacturing activity sank to the lowest level since the first Covid-19 lockdowns in 2020 as record inflation and a weakening global economy erode demand for goods. The Hang Seng Index rose in a session cut short by a storm warning.
Traders are weighing mixed economic data ahead of the Fed meeting, where the central bank is expected to raise interest rates by 75 basis points for the fourth time in a row. That would bring the upper limit of its target range to 4%, the highest level since 2008 as it extends its most aggressive tightening campaign since the 1980s.
Treasury yields were little changed and the yen strengthened in a sign traders anticipate a muted impact of Fed tightening on the currency.
Focus will be on Fed Chair Jerome Powell’s comments following the decision as traders seek clues about where policy is headed.
A continuation of the recent equity rally is contingent on the Fed supporting the “pivot narrative” and the market’s optimism on the matter is “misplaced,” according to Barclays strategists. Former Treasury Secretary Larry Summers also warned that expectations the central bank would pivot were “badly misguided,” saying the Fed should “stay on the current course.”
European investors are grappling with an energy crisis, a looming recession and soaring prices. A.P. Moller-Maersk A/S, a bellwether for global trade, cut its forecast for the global container market, saying demand will shrink as much as 4% this year and could also contract in 2023 as an economic slowdown weighs on bookings.
Healthcare stocks outperformed in Europe after Novo Nordisk A/S raised its operating profit and sales forecasts for the year. Mining and energy shares gained as oil rallied on reports of dwindling US stockpiles.
US-listed Chinese stocks rallied in premarket trading after new unverified social media posts saying the government is considering a slew of changes to its Covid Zero policy, including a shorter quarantine period for inbound travelers.
Meanwhile, China ordered a seven-day lockdown of the area around Foxconn Technology Group’s main plant in Zhengzhou, a move that will severely curtail shipments in and out of the world’s largest iPhone factory.
Key events this week:
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EIA crude oil inventory report, Wednesday
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Federal Reserve rate decision, Wednesday
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US MBA mortgage applications, ADP employment, Wednesday
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Bank of England rate decision, Thursday
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US factory orders, durable goods, trade, initial jobless claims, ISM services index, Thursday
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ECB President Christine Lagarde speaks, Thursday
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US nonfarm payrolls, unemployment, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 was little changed as of 9:25 a.m. London time
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Futures on the S&P 500 were little changed
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Futures on the Nasdaq 100 rose 0.1%
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index rose 2%
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The MSCI Emerging Markets Index rose 2.3%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.1% to $0.9889
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The Japanese yen rose 0.8% to 147.10 per dollar
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The offshore yuan rose 0.3% to 7.2893 per dollar
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The British pound was little changed at $1.1494
Cryptocurrencies
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Bitcoin was little changed at $20,474.5
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Ether fell 0.5% to $1,567.85
Bonds
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The yield on 10-year Treasuries was little changed at 4.04%
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Germany’s 10-year yield was little changed at 2.13%
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Britain’s 10-year yield declined two basis points to 3.45%
Commodities
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Brent crude rose 0.3% to $94.97 a barrel
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Spot gold rose 0.5% to $1,655.63 an ounce
–With assistance from Richard Henderson, Brett Miller and Shen Hong.
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