(Bloomberg) — US equity futures edged higher as investors awaited jobs data for clues on the strength of the economy and assessed whether turmoil among American regional banks will help bring forward a Federal Reserve rate cut. The dollar pared a decline.
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PacWest Bancorp jumped as much as 26% in premarket trading, leading a rebound across regional banking stocks following a bruising week of losses amid escalating worries over the health of the industry. Apple Inc. rose after the company reported that sales of iPhones rebounded last quarter. Futures contracts on the S&P 500 and the Nasdaq 100 climbed at least 0.3%.
European stocks were steady as they headed for the worst weekly decline in seven on another busy day of earnings. Adidas AG was among the leading gainers after the sportswear company’s first-quarter results beat estimates.
A weaker dollar supported riskier assets as swap contracts pointed to bets on a US interest-rate cut by July. The Bloomberg dollar index trimmed its retreat, but remained on course for its worst week in more than a month. The policy-rate sensitive two-year Treasury yield has dropped 20 basis points this week, the most since early March.
“We do believe the US interest rates are peaking and we should see a decline,” Irene Goh, head of multi-asset solutions, APAC, for abrdn, said in an interview with Bloomberg Television. “However, the decline or easing of monetary policy should probably come only when a recession hits.”
An advance for oil placed the commodity on track for its first gain in five days after signs of weaker demand dragged the price more than 10% lower this week. Gold held gains of around 3% this week.
Attention turns next to Friday’s monthly Labor Department report, which will give the Fed a reading on the resilience of the job market. Economists forecast that employers scaled back hiring and that the unemployment rate ticked up slightly from historically low levels last month. Figures out Thursday showed applications for unemployment benefits rose by the most in six weeks while continuing claims fell.
“Any whiff of meaningful labor market softening will be seen as validating the Fed’s recent decision to turn more data dependent and dovish,” Michael Wan, senior currency analyst at MUFG Bank Ltd., wrote in a note.
While the Fed may be signaling its willingness to pause rate hikes, Bank of America Corp.’s Michael Hartnett said it’s not yet time to buy equities as outflows accelerate amid elevated inflation and recession fears. Redemptions from global stock funds reached $6.6 billion in the week through May 3 — the most in more than two months, according to a note from the bank citing EPFR Global data.
Hartnett said that a “new structural bull market requires big Fed easing,” which in turn needs a “big recession.”
Strategists at JPMorgan Chase & Co. said investors are likely to favor gold and technology stocks as those bets are expected to provide a buffer against the possibility of a US recession this year. “The US banking crisis has increased the demand for gold as a proxy for lower real rates as well as a hedge against a ‘catastrophic scenario,’” strategists including Nikolaos Panigirtzoglou and Mika Inkinen wrote in a note.
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 was little changed as of 9:37 a.m. London time
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S&P 500 futures rose 0.3%
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Nasdaq 100 futures rose 0.4%
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Futures on the Dow Jones Industrial Average rose 0.2%
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The MSCI Asia Pacific Index rose 0.3%
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The MSCI Emerging Markets Index rose 0.4%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro rose 0.2% to $1.1029
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The Japanese yen rose 0.2% to 134.05 per dollar
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The offshore yuan was little changed at 6.9151 per dollar
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The British pound rose 0.3% to $1.2608
Cryptocurrencies
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Bitcoin rose 0.8% to $29,111.37
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Ether rose 1.1% to $1,899.5
Bonds
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The yield on 10-year Treasuries was little changed at 3.38%
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Germany’s 10-year yield advanced five basis points to 2.24%
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Britain’s 10-year yield advanced six basis points to 3.71%
Commodities
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Brent crude rose 1.2% to $73.35 a barrel
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Spot gold fell 0.5% to $2,039.79 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck and Richard Henderson.
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