Chinese stocks aim higher; S&P 500 stays on Powell’s momentum: Market recap

(Bloomberg) — European stocks edged higher after fresh highs for U.S. stocks as traders stuck to their bets that the Federal Reserve will cut interest rates this year.

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The Euro Stoxx 600 index rose about 0.2% before slowing its advance. Natural resources stocks declined as crude oil and base metals prices fell. Futures for the S&P 500 and Nasdaq 100 were little changed as traders analyzed comments from Fed Chairman Jerome Powell on the U.S. economy.

The S&P 500 index climbed for a sixth straight session Tuesday, its longest streak since January, after Powell highlighted growing signs of a slowing labor market in remarks to lawmakers Tuesday. The Nasdaq 100 also hit a record high. Swaps traders continue to price in two rate cuts in 2024.

Treasury yields were steady, with two-year bond yields at three-month lows as investors expected more benefits from monetary policy easing. The dollar index was little changed.

Powell’s comments “continue to prepare the market for a rate cut later this year,” said Michael Feroli of JPMorgan Chase & Co. “Powell has largely stuck to the script when it comes to the economy.”

Further testimony from Powell before Congress on Wednesday, as well as key U.S. inflation and employment data tomorrow, could provide additional clues about the path of economic policy.

Among individual stock moves in Europe, Spain’s Enagas SA climbed more than 4% after agreeing to sell its 30% stake in U.S. pipeline company Tallgrass Energy to Blackstone Infrastructure Partners.

Elsewhere, Japanese stocks advanced, while those in China and Australia declined, leaving a gauge of the region’s stocks little changed.

China’s consumer prices edged up again in June, holding near zero for the fifth consecutive month, a sign that deflationary pressures continue to hamper economic recovery. Factory gate prices remain stuck in deflation.

Bond traders are bracing for China to start pushing back against record low yields, with the central bank now armed with “hundreds of billions” of yuan in securities at its disposal to sell.

In commodities, oil edged lower as concerns over Chinese demand and lingering uncertainty over the timing of the Federal Reserve’s interest rate cut overshadowed signs of further U.S. inventory drawdowns. Copper and iron ore declined, while gold was flat.

Main events of the week:

  • Jerome Powell Testifies Before the House Financial Services Committee on Wednesday

  • Fed members Austan Goolsbee, Michelle Bowman and Lisa Cook speak Wednesday

  • US CPI, Initial Jobless Claims, Thursday

  • Fed members Raphael Bostic and Alberto Musalem speak Thursday

  • Trade with China, Friday

  • University of Michigan Consumer Sentiment, US PPI, Friday

  • Citigroup, JPMorgan and Wells Fargo Results, Friday

Some of the main movements in the markets:

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  • The Stoxx Europe 600 index rose 0.1% at 8:13 a.m. London time.

  • S&P 500 futures were little changed

  • Nasdaq 100 futures rose 0.1%

  • Dow Jones Industrial Average futures were little changed

  • The MSCI Asia Pacific Index…

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