US Futures Turn Positive; UK Turmoil Is in Focus: Markets Wrap

(Bloomberg) – U.S. stock futures switched to gains as investors reacted to robust corporate earnings, with AT&T Inc. and American Airlines Group Inc. among the latest estimates from analysts.

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S&P 500 and Nasdaq 100 contracts edged higher, reversing earlier declines, as AT&T and American Air rose in premarket trading. However, Tesla Inc. fell after the electric vehicle maker missed sales. Telecoms were the biggest laggards in Europe, while luxury stocks outperformed after sales of Birkin handbag maker Hermes International soared.

Investors are closely watching events in Britain, where Liz Truss’ chaotic prime minister’s office nearly imploded. Truss is meeting with the official in charge of voting Conservative Party leadership, her office said in a statement. The pound recouped earlier losses while 10-year UK government bonds rallied.

The yen weakened above the closely watched 150 per dollar level, hitting a 32-year low and keeping investors on high alert for more intervention to support it. The move followed a rise in US Treasury yields to multi-year highs, widening the gap to Japanese equivalents. A Bloomberg indicator of dollar strength fell.

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A generally strong start to the third quarter earnings season has boosted sentiment towards equities. But investors need to weigh signs of corporate resilience against fears about the impact of persistent inflation, tightening measures from the Federal Reserve and other central banks, and threats to the economy.

“I think the market is now looking towards 2023 and baking some sort of slight downtrend in price,” Hugh Gimber, global market strategist at JPMorgan Asset Management, told Bloomberg Television. “The key is that inflation numbers come down because when they do, 5% for the Fed strikes me as about the right number and then the market can have a clearer picture.”

Federal Reserve Bank of St. Louis President James Bullard said he expects the Federal Reserve to end its “frontloading” of aggressive rate hikes by early next year and move to keeping the policy sufficiently restrictive with small adjustments when inflation cools down.

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The Fed is expected to hike interest rates by 75 basis points at its Nov. 1-2 meeting – the fourth straight hike of this magnitude – as central bankers try to cool the hottest inflation in four decades.

Elsewhere in markets, oil rose as Chinese officials debated relaxing some Covid rules, a policy that has weighed on the economy and energy needs. Gold rose after trading near a three-week low.

Important events this week:

  • US Existing Home Sales, Initial Jobless Claims, Conference Board Leading Index, Thursday

  • Eurozone Consumer Confidence, Friday

Some of the key movements in the markets:

Stocks

  • Futures on the S&P 500 were up 0.3% at 7:15 am New York time

  • Futures on the Nasdaq 100 were little changed

  • Futures on the Dow Jones Industrial Average rose 0.5%

  • The Stoxx Europe 600 fell 0.3%

  • The MSCI World Index has hardly changed

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currencies

  • The Bloomberg Dollar Spot Index fell 0.3%

  • The euro rose 0.5% to $0.9825

  • The British pound rose 0.1% to $1.1231

  • The Japanese yen rose 0.1% to 149.72 per dollar

cryptocurrencies

  • Bitcoin was little changed at $19,202.75

  • Ether was up 0.4% to $1,299.94

Bind

  • The 10-year government bond yield fell one basis point to 4.12%

  • The 10-year German government bond yield rose one basis point to 2.39%

  • The 10-year UK government bond yield fell 6 basis points to 3.82%

raw materials

  • West Texas Intermediate crude rose 1.7% to $86.98 a barrel

  • Gold futures rose 0.5% to $1,642 an ounce

–Assisted by Brett Miller and Allegra Catelli.

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