LONDON (Reuters) – Wall Street is set to open higher on Monday, tracking gains in Asia and Europe as investors take expected interest rate hikes in the coming days despite crude oil hitting $120 a barrel.
S&P 500 futures are up 1% and Nasdaq is up 1.4%.
US shares listed in Chinese passenger services company Didi Global surged 50% after the Wall Street Journal reported that Chinese regulators were preparing to allow the mobile app again in local app stores.
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The news helped Hong Kong’s tech Hang Seng close 4.6% higher. Stocks in Europe have been flatter since the opening, with STOXX reaching 600 companies (.stoxx) by 0.9%.
The shift to riskier assets came ahead of central bank meetings that investors hope will show whether inflation has peaked and how slow growth is.
The European Central Bank meets on Thursday, although it is not expected to start raising interest rates until July, when the US Federal Reserve and Bank of England rate-setters meet next week.
“There is still some doubt about whether or not inflation has peaked,” said Michael Hewson, chief market analyst at CMC Markets.
“We are in no-man’s-land at the moment in terms of peak inflation, as well as reopening China and the potential tailwinds that it could bring. Oil prices are still headwinds and therefore it is hard to get any direction,” Hewson said.
MSCI All Countries Stock Index (.MIWD00000PUS) Gaining 0.3%, its recent recovery from bear market territory remains largely intact.
blue chips in london (.FTSE) Sterling gained 1.2%, shrugging off the news that British Prime Minister Boris Johnson will face a vote of confidence by ruling Conservative Party lawmakers on Monday. Read more
Oil prices strengthened after Saudi Arabia sharply raised its sales prices for crude in July, an indication of how tight supply is even after OPEC+ agreed to speed up production increases over the next two months.
Brent rose 0.2 percent to $ 120.02 a barrel. US crude rose 0.2 percent to $119.14 a barrel.
Gregory Burdon, chief investment officer at Arbuthnot Latham, said investors should balance bearish factors such as inflation, higher rates, the war in Ukraine and a stronger dollar against accommodative monetary policy, despite slowing economic growth and Chinese stimulus.
“Overall, I think it will be more rewarding to take a risk in this environment than to bet on risky assets,” Purdon said.
“We’ve had seven out of eight weeks of negativity on the S&P 500 and that’s probably a good entry point in terms of adding risk to porphyros, assuming you don’t have much of a risk to begin with.”
The sentiment was helped by US Commerce Secretary Gina Raimondo’s statement that President Joe Biden has asked his team to consider the option of raising some tariffs on Chinese imports. Read more
European Central Bank, CPI LOOM
At Thursday’s European Central Bank meeting, President Christine Lagarde is certain to confirm the end of bond buying this month and the first rate hike in July, although the jury is out on whether that will be 25 or 50 basis points, as it stands With some investment banks. They intensified their expectations. Read more
Money markets are pricing in 130 basis points of price increases by the end of the year, with a 50 basis point move in one full price meeting by October.
The prospect of a shift in interest rates from the European Central Bank this year helped lift the euro to $1.0724, away from its recent low of $1.0348, although it struggled to remove resistance around $1.0786.
The euro also hit a seven-year high against the yen at 140.39, after rising 2.9% last week, while the dollar settled at 130.67 yen after rising 2.9% last week.
Against a basket of currencies, the dollar was flat at 102, little changed on the day, after jumping 0.4% last week.
After the European Central Bank on Thursday, markets will scrutinize the US consumer price report the next day, especially after European Union inflation shocked many to a record high last week.
Expectations are for a sharp rise of 0.7% in May, although the annual pace is expected to hold at 8.3% while core inflation is expected to slow slightly to 5.9%.
The higher number will only heighten expectations of a hard tightening from the Federal Reserve next week, with markets already pricing in half-point increases in June and July and nearly 200 basis points by the end of the year.
In commodity markets, wheat futures jumped 4% after Russia bombed the Ukrainian capital of Kyiv, dampening hopes for progress in peace talks. Read more
Gold was at $1,854 an ounce, up 0.2%, after holding a tight range for the past two weeks.
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Editing by Alex Richardson and John Stonestreet
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