European Stocks Powered Higher by Tech Before ECB: Markets Wrap

(Bloomberg) — European stocks rose ahead of a widely expected interest rate cut by the European Central Bank as markets reassessed bets of policy easing this year.

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Tech shares led gains in the Stoxx 600 index after the sector fueled fresh all-time highs on Wall Street Wednesday. Futures for US equities steadied following the S&P 500’s 25th record close this year. Nvidia Corp., a major beneficiary of the massive flood of artificial intelligence investment, became the first computer-chip company to hit $3 trillion in market capitalization.

“Behind a lot of the optimism that you’re seeing in markets, technology is still continuing to lead the pack,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management. “If you look the earnings revisions to see what’s working and what’s not, technology is leading.”

The focus turns to the ECB later, when traders will be looking for guidance on the path forward for monetary policy, notably from President Christine Lagarde at the press briefing. Views on additional rate cuts this year have turned more cautious in the wake of data showing stronger-than-anticipated economic growth, inflation and wage increases.

As investors awaited Friday’s US jobs report, a private payrolls reading on Wednesday showed hiring at companies grew at the slowest pace since the start of the year. Meantime, the services sector expanded by the most in nine months, powered by the largest monthly gain in a measure of business activity since 2021.

A Bloomberg index of global government bonds rose for a fifth straight session on Wednesday, its best performance since December, as traders ramped up rate-cut bets. The dollar retreated as policymakers in Canada reduced borrowing costs Wednesday, increasing the focus on the US rate path.

“There’s a bit more optimism surrounding the Fed’s ability to cut rates in the back half of this year,” Northwestern Mutual’s Stucky said. “With the Bank of Canada cutting rates and the expectation ECB will do so, momentum behind a coordinated global easing cycle is starting to gain some traction.”

Treasury yields inched higher after falling in the previous session, with markets almost fully pricing in two Federal Reserve rate cuts in 2024.

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In Asia, stocks rose for the first time in three days, with Indian equities extending gains after Prime Minister Narendra Modi won crucial backing from two key allies in his coalition.

In Japan, the yen trimmed earlier gains after Bank of Japan policy board member Toyoaki Nakamura said it’s appropriate to maintain current policy for the time being. The Japanese currency recovered from an overnight selloff in what has been a volatile week for the yen thanks to its role in emerging market carry trades.

Elsewhere, China’s property stocks were on track to enter a technical bear market as doubts remained on Beijing’s efforts to bolster the sector. A Bloomberg Intelligence gauge of the nation’s developer shares extended losses from a mid-May high to about 20%.

In commodities, oil rose for a second session even as Saudi Arabia signaled concerns over the demand outlook with cuts to its crude prices. Copper led a rally in industrial metals prices, rising 1.5%, while zinc and nickel also gained by more than 1%.

Key events this week:

• Eurozone retail sales, ECB rate decision, Thursday

• US initial jobless claims, trade, Thursday

• China trade, forex reserves, Friday

• Eurozone GDP, Friday

• US unemployment rate, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.6% as of 8:30 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures rose 0.1%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 0.8%

• The MSCI Emerging Markets Index rose 0.9%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.1% to $1.0881

• The Japanese yen was little changed at 156.17 per dollar

• The offshore yuan was little changed at 7.2609 per dollar

• The British pound was little changed at $1.2794

Cryptocurrencies

• Bitcoin fell 0.5% to $70,894.4

• Ether fell 0.6% to $3,841.85

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.30%

• Germany’s 10-year yield was little changed at 2.52%

• Britain’s 10-year yield advanced one basis point to 4.19%

Commodities

• Brent crude rose 0.6% to $78.89 a barrel

• Spot gold rose 0.4% to $2,365.63 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess and Toby Alder.

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