European stocks climb on debt deal and softer inflation data

BLOOMBERG

European stocks climbed after three days of declines, while US futures edged higher after the House passed a deal to avert a US default and Federal Reserve officials hinted at a pause in interest-rate hikes.
Banks and carmakers led gains in the Stoxx Europe 600 index as data showed euro-area inflation slowed more than analysts’ estimates in May. Adnoc Logistics & Services, the maritime logistics unit of Abu Dhabi’s main energy company, soared as much as 52% on its debut after a hugely oversubscribed initial public offering.
The advance in European stocks echoed a move higher in Asia, where markets got an initial boost from some encouraging economic data out of China.
Passage of the debt-ceiling deal struck by House Speaker Kevin McCarthy and President Joe Biden means the bill will be sent to the Senate days before the June 5 default deadline. The signs of optimism were helped along by comments from Fed officials who backed the possibility of holding rates unchanged the next meeting.
“Finally, some good news is driving today’s optimism,” said Ludovica Scotto di Perta,  a structured-product specialist at Swissquote Bank SA.
“US raising the debt ceiling and sentiment that the Fed will pause are boosting risk appetite. It might only be temporary but we will take anything at this point.”
The euro erased losses against the dollar after data showed underlying inflation in the euro zone dipped by more than expected in May, though that may not stop the European Central Bank from raising rates. European Central Bank Governing Council member Olli Rehn said the bank won’t contemplate lowering borrowing costs before core consumer-price growth slows in a continuous manner.

Modest Gain
The modest gains in S&P 500 futures followed a 0.6% loss for the benchmark that left it clinging to a small gain for May. Nasdaq 100 futures were little changed after the underlying index fell 0.7% as the rapid rally in tech stocks benefiting from artificial intelligence stalled.
Nvidia Corp was steady in premarket trading after the retreat. C3.ai Inc plunged as much as 22% following a disappointing outlook.
“A June swoon may be in the cards as the S&P 500 struggles to clear key resistance at 4,200,” said Adam Turnquist, chief technical strategist at LPL Financial.
“While a deal in Washington could be a catalyst for a breakout, overbought conditions in the technology sector and mega-cap space — the primary drivers of this year’s market advance — could make this a high hurdle for the market to clear on a near-term basis, especially without broader participation.”
A gauge of the dollar was flat, while Treasuries dropped, largely reversing a rally in the previous session. Hopes for a Fed pause were partly pared back after Wednesday’s JOLTS jobs report for April showed more than 10 million openings, the highest in three months and above consensus estimates.
But Fed Governor Philip Jefferson said the central bank is inclined to keep interest rates steady in June to assess the economic outlook. His remarks were echoed by Philadelphia Fed President Patrick Harker, who said, “I think we can take a bit of a skip for a meeting.”
In Asian trading, gains in Chinese stocks faded as investors studied mixed readings on the country’s manufacturing activity. Caixin manufacturing data for May showed an expansion, exceeding forecasts for a small contraction. The numbers followed official figures Wednesday that showed a further contraction in activity.