US stocks rallied alongside Treasuries as oil prices fell, raising hopes that inflation can be kept under control after the Federal Reserve raised interest rates and signalled more tightening to come.
Futures for the S&P 500 rose 0.7 per cent, while those for the Nasdaq 100 climbed 0.8 per cent. Brent crude headed for back-to-back losses for the first time this month, trading 1 per cent lower below $105 a barrel. Treasuries climbed across the curve, with the 10-year yield down four basis points to 4.99 per cent. The dollar was little changed, while gold headed for its first gain of the week.
With the Fed decision out of the way, markets are weighing what comes next after the rate hike and pledge to contain inflation eased some of the strain that had built around price pressures. Falling oil is adding to hopes that the worst fears over inflation won’t come to pass.
The Fed’s so-called dot plot, which officials use to signal their outlook for policy, suggests one more hike this year. Money markets are pricing in a total of three hikes over the next 12 months.
Signs that supply disruptions in the Middle East were set to ease helped drive the pullback in crude. President Donald Trump is also set to meet with Persian Gulf leaders next week on the sidelines of the UN General Assembly in New York to discuss the next steps in the conflict, Axios reported.
“Current market expectations for additional rate hikes in 2027 are probably overdone,” said Joachim Klement, a strategist at Panmure Liberum. “We think that the next move in bond yields is probably lower, which in turn should support stock markets.”
In Europe, the Stoxx 600 rose 0.3 per cent, with economically sensitive shares outperforming. The Bank of England is widely expected to hold its benchmark rate unchanged later on Thursday, with a hike on the cards at its following meeting in November. Gilts fell, led by losses at the shorter end.
In Asia, the yen’s sharp drop after the Fed’s hawkish hike is raising the stakes for the Bank of Japan’s policy meeting Friday. The currency weakened as much as 1 per cent overnight to 156.42 per dollar, before paring some losses later on Thursday.
A 25-basis-point BOJ increase is almost fully priced by overnight index swaps, leaving traders focused on Governor Kazuo Ueda’s post-press conference for clues on the pace and scope of further tightening.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.3 per cent as of 9:16 a.m. London time
- S&P 500 futures rose 0.7 per cent
- Nasdaq 100 futures rose 0.8 per cent
- Futures on the Dow Jones Industrial Average rose 0.7 per cent
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1469
- The Japanese yen rose 0.3 per cent to 155.83 per dollar
- The offshore yuan was little changed at 6.7083 per dollar
- The British pound was unchanged at $1.3381
Cryptocurrencies
- Bitcoin rose 0.3 per cent to $76,347.95
- Ether rose 1.2 per cent to $2,437.55
Bonds
- The yield on 10-year Treasuries declined four basis points to 4.99 per cent
- Germany’s 10-year yield advanced one basis point to 3.52 per cent
- Britain’s 10-year yield advanced one basis point to 5.31 per cent
Commodities
- Brent crude fell 1 per cent to $104.80 a barrel
- Spot gold rose 1.3 per cent to $4,320.74 an ounce
This story was produced with the assistance of Bloomberg Automation.
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