US stocks rise before Fed decisions; Treasuries slip

Bloomberg

US equities climbed as investors awaited this week’s central bank decisions, including word from a recently more-dovish Federal Reserve. The euro strengthened while Treasuries slipped.
The S&P 500 Index continued rising on Tuesday after climbing to a five-month high the day before. Consumer-discretionary, materials and semiconductor stocks led the charge. The Dow Jones and Nasdaq 100 gauges followed suit, while European shares gained after Asian stocks drifted.
The Fed’s shift in recent months has helped reignite a global equity rally on bets that policy makers will act to support growth. Volatility has evaporated across assets as a result, but with expectations the Fed will point to one more rate hike in 2019, it’s possible markets could be over-pricing a Goldilocks scenario.
And even as stocks rally, uncertainty surrounding Brexit and trade remains.
“The rally that we’ve seen this year is really built primarily on the Fed pivot, so I think investors have this built in expectation not only that the Fed will not hike rates this year, but actually there’s a marginal percentage that they may actually cut rates this year,” according to Anthony Saglimbene, a global market strategist for Ameriprise Financial.
The Stoxx Europe 600 Index advanced after a quiet start, as every sector flashed green. Equities posted modest losses in Japan, China and Australia, but rose in Hong Kong and India. The pound fluctuated on word that European Union leaders are planning to offer the UK a conditional Brexit extension at this week’s summit in Brussels, giving PM Theresa May one more chance to get her deal through Parliament. The euro extended an advance after data showed German investor confidence rose for a fifth straight month.
The Bank of England also meets this week, though given the backdrop of Brexit uncertainty investors see little chance of a policy shift. In Asia, central banks in Indonesia, the Philippines and Thailand hold meetings amid expectations they too will stand pat. Policy makers could signal some willingness to cut in coming months as low inflation sweeps across the region.
Elsewhere, West Texas crude hovered near a four-month high after OPEC and its allies recommended deferring a decision on whether to extend oil production cuts until June.
Company earnings this week include FedEx, Tencent, Hermes, Tiffany, Micron, Nike and PetroChina. On Wednesday the Fed is expected to hold interest rates steady, announce plans for the end of asset roll-off from its balance sheet, and lower projections for the number of interest-rate hikes this year. Central banks in the UK, Thailand, the Philippines and Indonesia are all scheduled for policy meetings.
The S&P 500 Index rose 0.3 percent in New York, to the highest in more than five months. The Stoxx Europe 600 Index jumped 0.7 percent. The UK’s FTSE 100 Index climbed 0.6 percent. The MSCI Emerging Market Index gained 0.1 percent to the highest in more than seven months.
The Bloomberg Dollar Spot Index fell 0.1 percent to the lowest in almost three weeks. The euro climbed 0.1 percent to $1.1347, the strongest in more than two weeks. The British pound rose less than 0.05 percent to $1.3258. The Japanese yen was unchanged at 111.43 per dollar.
The yield on 10-year Treasuries gained one basis point to 2.62 percent. Germany’s 10-year yield rose three basis points to 0.11 percent.