(Bloomberg) — European stocks are set to gain early on the back of strength in Asian markets at the start of a week filled with major central bank decisions and big tech earnings reports, while the yen strengthened.
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Euro Stoxx 50 futures rose 0.5%, while major U.S. futures also rose. The bullish mood started early in Asia, where the major indexes notched their biggest gains in more than two weeks as investors raised hopes of a Federal Reserve interest rate cut.
Attention this week will be on monetary policy decisions in Japan, the United States and the United Kingdom after the yen’s recent surge on expectations that the Bank of Japan would raise interest rates roiled global markets. Also in the spotlight will be the results of companies such as Apple, Amazon.com and Microsoft, whose shares have plummeted following a disappointing start to the earnings season for major companies.
The yen rose against all Group of 10 currencies on Monday, boosted by hopes of monetary tightening in Japan. The long-struggling currency has clawed back losses in recent trading and is now on track to post its best monthly performance against the dollar this year.
“There are three components to watch for in central bank policy decisions, particularly the FOMC, which is expected to maintain status quo but signal a rate cut soon,” wrote analysts at Oversea-Chinese Banking Corp. The Bank of Japan is likely to announce quantitative tightening, while the Bank of England “is expected to implement its first rate cut since 2020.”
The 10-year government bond yield fell 1 basis point to 4.18 percent. China’s benchmark government bond yield fell to a record low amid a sharp bond rally that has raised regulators’ concerns about financial risks.
The Fed is likely to signal plans for a September rate cut at the end of its meeting on Wednesday, economists said, which would mark the start of a series of quarterly rate cuts through 2025. Money markets are fully pricing in a September rate cut, with two more cuts possible by the end of the year, according to swaps data compiled by Bloomberg.
“While the July FOMC meeting may be too early to start cutting rates, it’s not too early to start preparing for a September rate cut,” Stephen Gallagher, economist at Societe Generale, wrote in a client note.
Hours before the Fed’s decision, the Bank of Japan is expected to announce details of its plan to reduce its monthly bond purchases at the end of its two-day policy meeting on Wednesday, but most economists also see the risk of a rate hike.The yen rose 2.4 percent against the dollar last week as traders put the chance of a 10 basis point hike at more than two-thirds, triggering a sell-off in risk-sensitive developed and emerging market currencies and leading to a technical correction in the Nikkei average.
As for the Bank of England, a close vote is expected but most economists expect it to cut interest rates on August 1 for the first time since the start of the pandemic.
Oil prices are stabilizing near six-week lows ahead of a key OPEC+ meeting this week, but analysts are divided over whether the group will go ahead with plans to boost supply next quarter. The coalition is trying to bring back supplies that have been withdrawn from the market for two years in a bid to boost prices, but slowing economic growth in major consumer China and new crude supplies from the Americas threaten to derail the plan.
Major events this week:
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McDonald’s, Heineken earnings Monday
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Microsoft earnings on Tuesday
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European inflation and growth data on Tuesday
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Australian Consumer Price Index, Wednesday
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Bank of Japan policy decision Wednesday
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Metaplatform Earnings Wednesday
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Wednesday’s interest rate decision and press conference by Fed Chairman Jerome Powell
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Bank of England to set interest rates on Thursday
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Amazon, Apple earnings Thursday
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The US is due to raise tariffs on a range of Chinese imports on Thursday, including electric vehicles, batteries, chips and medical products.
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South Korea Consumer Price Index, Friday
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U.S. jobs, factory orders on Friday
Some of the key market developments:
stock
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S&P 500 futures were up 0.4% as of 2:11 p.m. Tokyo time.
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Nikkei 225 futures (OSE) rose 2.3%
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Japan’s TOPIX rises 2.2%
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Australia’s S&P/ASX 200 rose 0.8%
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Hong Kong’s Hang Seng rose 1.9%
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The Shanghai Composite Index rose 0.1%
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Euro Stoxx 50 futures up 0.4%
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro was little changed at $1.0860
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The Japanese yen rose 0.2% to 153.40 yen to the dollar.
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The offshore yuan was little changed at 7.2629 per dollar.
Cryptocurrency
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Bitcoin rose 2.1% to $69,432.51.
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Ether rose 2.6% to $3,344.35.
Bonds
merchandise
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West Texas Intermediate crude rose 0.3% to $77.39 a barrel.
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Spot gold rose 0.4% to $2,395.67 an ounce.
This story was produced with assistance from Bloomberg Automation.
–Matthew Burgess with assistance.
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