Stocks rose the most since July before the Fed’s decision: markets are enveloping

(Bloomberg) – US stocks rose the most since July, as concerns over China Evergrande Group’s debt problems eased ahead of the Federal Reserve’s policy move on Wednesday. T-bills and the dollar have changed little.

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The S&P 500 climbed to 1.3%, led higher by the energy and financials sectors. The benchmark index had fallen for four consecutive trading sessions. FedEx Corp. collapsed after slashing its earnings outlook on Tuesday night.

“It’s clear that things have gotten a little tidier instead of descending into chaos over the past few sessions,” wrote Mark McCormick, global head of currency strategy at TD Securities.

Basic resources and energy were among the top gainers in the Stoxx Europe 600 index as commodity prices stabilized after Beijing moved to contain fears of a spiraling debt crisis at Evergrande which could devastate demand in the real estate sector.

China avoided a massive sell-off as trade resumed after a holiday, after the country’s central bank increased its injection of short-term liquidity into the financial system.

Read more: The Fed’s tapering debate has become much trickier

The Fed’s potential timeline to gradually reduce stimulus measures and any change in expectations for interest rate hikes will be critical for investors, who have become accustomed to central bank stimulus measures supporting asset prices. The Fed meeting comes after a period of market volatility fueled by the woes of Evergrande. Wider restrictions on China’s real estate sector are also fueling concerns about a slowing economic recovery after the pandemic.

“The market largely expects the Fed to cut back on its bond purchases in November or December, so in theory this concept alone shouldn’t encourage too much volatility,” said Chris Weston, head of the research at Pepperstone Financial Pty. “However, markets can react in unexpected ways to the facts, especially during this period of slower growth and concerns about the Chinese real estate sector.

Meanwhile, Governing Council member Madis Muller has said the European Central Bank may increase its regular asset purchases once emergency pandemic-era stimulus measures end.

The pound weakened after Business Secretary Kwasi Kwarteng warned people should prepare for long-term high energy prices amid a shortage of natural gas that has driven up costs of gasoline. ‘electricity. Several UK utilities have stopped accepting new customers as smaller energy providers struggle to meet previous commitments to sell supplies at lower prices.

In Japan, the central bank left its main monetary policy parameters unchanged. The markets in South Korea and Hong Kong were closed for a holiday.

Here are the key events to watch this week:

  • Federal Reserve rate decision on Wednesday

  • Bank of England rate decision, Thursday

  • Fed Chairman Jerome Powell, Fed Governor Michelle Bowman and Vice President Richard Clarida discuss pandemic recovery on Friday

For more market analysis, read our MLIV blog.

Some of the main movements in the markets:

Actions

  • The S&P 500 rose 1.2% at 11:53 a.m. New York time

  • The Nasdaq 100 rose 1%

  • The Dow Jones Industrial Average rose 1.3%

  • The Stoxx Europe 600 is up 1%

  • The MSCI World index increased by 0.9%

Currencies

  • Bloomberg Dollar Spot Index fell 0.1%

  • The euro rose 0.1% to $ 1.1738

  • The British pound was little changed at $ 1.3664

  • The Japanese yen fell 0.3% to 109.61 per dollar

Obligations

  • The yield on 10-year treasury bills fell one basis point to 1.31%

  • The German 10-year yield was little changed at -0.32%

  • The UK 10-year yield was little changed at 0.80%

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