US futures advance as Fed aligns with street wagers

Bloomberg

US equity-index futures rose as investors grew confident the Federal Reserve’s peak interest rate would be within levels already priced in by markets.
Contracts on the S&P 500 and Nasdaq 100 climbed at least 0.4% each after the underlying indexes avoided a selloff following the Fed’s minutes and remarks by officials. The dollar pared its losses and Treasuries were mixed. Europe’s equity benchmark halted a two-day loss as Nvidia Corp.’s bullish outlook sparked gains in global technology shares. Japan was closed for a holiday.
After months of divergence over the perceived path of monetary tightening, the Fed and markets are increasingly getting aligned in their expectations, reducing the scope for hawkish shocks. While the minutes and comments by Fed officials including James Bullard reiterated a continuing preference for rate hikes, they didn’t say anything that wasn’t factored in by the market’s aggressive repricing of Fed bets in recent weeks.
“One of our big concerns coming into this year was the market was anticipating an event that wasn’t likely to occur, that being a dovish Fed pivot,” Danielle Poli, co-portfolio manager of the diversified income fund for Oaktree Capital Management, said in an interview with Bloomberg Television. “The market has woken back up a little bit in these last two weeks.”
The dollar traded marginally weaker, having come off day’s lows. The Australian dollar showed the biggest gains against the greenback on stronger-than-expected business investment data and the
dip-buying by exporters.
Traders are now pricing in a Fed peak rate of 5.55% by July, compared with 4.90% they were betting on at the start of year. However, Fed officials haven’t grown more aggressive during this time: Fed Bank of St. Louis President Bullard reiterated his earlier stance, saying “I’m still at 5.375%.” Markets fully price in a 25 basis-point hike in March, but assign a 24% probability for a 50-point hike.
US Jobless claims data may help shine a light on the strength of the labour market, which has remained stubbornly robust through the rate-hiking cycle. Eurozone inflation data will also help investors outline the health of the European economy.
In stocks, South Korea’s benchmark rose the most in a week and the won advanced after the central bank kept its benchmark interest rate unchanged with its first pause in rate increases in a year.
In Europe, technology and industrial-goods shares drove the Stoxx 600’s small gains. Rolls-Royce Holdings Plc shares soared as much as 20% after the company’s full-year earnings.
New York premarket trading saw NVidia jump 8%. The chipmaker presented a bullish revenue outlook for the current quarter, suggesting that a push into artificial intelligence processors is helping offset sluggish demand for personal computer chips.
Oil steadied — after the longest run of losses this year — as traders took stock of a mixed demand outlook of tightening US monetary policy and China’s reopening.
The Stoxx Europe 600 rose 0.1% as of 9:30 am London time and S&P 500 futures rose as much as 0.4%.
While Nasdaq 100 futures rose 0.7%, futures on the Dow Jones Industrial Average rose 0.2% and the MSCI Asia Pacific Index rose 0.1%. The MSCI Emerging Markets Index also climbs 0.5%.
The Bloomberg Dollar Spot Index was little changed and the euro was little changed at around $1.0595.
While the Japanese yen was little changed at 134.87 per dollar, the offshore yuan was little changed at 6.9050 per dollar and the British pound fell 0.2% to $1.2021.