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(Bloomberg) — European stocks rose and the S&P 500 closed at a record high, boosted by optimism about U.S. interest rate cuts, after Federal Reserve Chairman Jerome Powell said inflation was returning to a downward trajectory.
Much of the focus remained on politics ahead of the UK election. In France, the benchmark CAC 40 rose more than 1% as anti-National Rally parties sought to prevent Marine Le Pen’s far-right group from winning an outright majority in the final round of legislative votes on Sunday. In the European region, the Stoxx 600 index rose 0.7%, led by technology stocks.
U.S. stock futures were steady ahead of a shorter-than-usual trading session due to the July 4 holiday. The S&P 500 closed above 5,500 for the first time on Tuesday, its 32nd record this year. The Nasdaq 100 also hit a record high, closing above 20,000 for the first time.
“We find that U.S. equity market momentum remains strong, inflation is falling and the likelihood of a September rate cut by the Federal Reserve has increased, which should be enough to sustain gains,” said Guy Miller, chief market strategist at Zurich Insurance Group.
The MSCI Inc. World Index, which measures developed and emerging markets, is at an all-time high, a testament to the broadly positive sentiment toward stocks. The S&P 500 has added more than $16 trillion in value since its October 2022 closing low, helped by strong earnings, a boom in artificial BroadCast Unitedligence and expectations of lower interest rates.
Later on Wednesday, investors will be watching U.S. initial jobless claims and ADP employment data for more clues on the policy outlook. Federal Reserve Chairman Jerome Powell acknowledged the central bank has made “considerable progress” in reducing inflation but stressed that officials need more evidence before cutting rates. The dollar and Treasuries remained stable.
Markets were also gearing up for long-awaited U.S. jobs data due on Friday. Economists expect the report to show employers added about 190,000 workers in June and the unemployment rate likely remained at 4%.
Zurich Insurance’s Miller said: “There are clear signs that the U.S. economy and labor market are slowing, and Friday’s jobs data should confirm this, paving the way for the Federal Reserve to cut interest rates in September.”
The story continues
However, recent political turmoil in Europe poses a risk to the positive view on stocks. Data showed hedge funds sold stocks in the region as France’s surprise election rocked markets. The move was driven by a roughly equal amount of liquidation of long positions and an increase in short bets, Goldman Sachs Group Inc.’s prime brokerage unit said.
Goldman Sachs said Europe’s June reduction in overweight positions was the largest among global regions, reversing a buying trend in May. The funds significantly reduced their exposure to financial stocks, especially banks, with net selling in the sector the largest since November 2021.
Elsewhere on Wednesday, Asian stocks posted their longest winning streak since May. Japanese stocks rose, with the index now less than 1% above its all-time high.
Oil prices rose to near two-month highs after the American Petroleum Institute reported a 9.2 million-barrel drop in crude inventories last week, according to people familiar with the matter. If confirmed by official data later on Wednesday, it would be the biggest drop in per-barrel prices since January.
Main events this week:
S&P Global Eurozone Services PMI and PPI, Wednesday
Fed minutes, ADP employment, ISM services, factory orders, initial jobless claims, durable goods, Wednesday
Fed’s John Williams to speak on Wednesday
UK general election, Thursday
Independence Day holiday, Thursday
Eurozone Retail Sales Friday
US jobs report on Friday
Fed’s John Williams to speak on Friday
Some key market trends:
action
At 10:26 a.m. London time, the Stoxx Europe 600 index rose 0.7%.
S&P 500 futures remain steady
Nasdaq 100 futures remain stable
Dow Jones Industrial Average futures rose 0.1%
MSCI Asia Pacific Index rose 0.7%
MSCI Emerging Markets Index rose 0.8%
coin
Bloomberg Dollar Spot Index remains stable
The euro rose 0.1% to $1.0760
The yen fell 0.2% to 161.82 against the dollar
Offshore RMB/USD exchange rate stabilized at 7.3077
Sterling remains steady at $1.2696
Cryptocurrency
Bitcoin falls 2.3% to $60,499.41
Ethereum falls 2.2% to $3,340.35
bonus
The 10-year Treasury yield is steady at 4.44%.
Germany’s 10-year bond yield rose 3 basis points to 2.63%
UK 10-year bond yields fell two basis points to 4.23%
Basic products
Brent crude remains stable
Spot gold rose 0.6% to $2,343.36 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani and Winnie Hsu.
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