European Shares Poised For Steady Start As Rate Hike Bets Ease

European stocks are likely to open on a positive note Monday as traders scale back their expectations for how much the Federal Reserve will increase interest rates in the months ahead.

Treasury yields were little changed and the dollar drifted down from its multi-year highs, helping gold prices recover some ground.

Oil prices extended Friday’s gains as U.S. President Joe Biden concluded his trip to the Middle East.

Saudi Arabia’s foreign minister said that there was no discussion on oil at the U.S.-Arab summit and that OPEC+ would continue to assess market conditions and do what is necessary.

Asian markets rose broadly despite several large Chinese cities including Shanghai enforcing new COVID-19 testing rules due to new outbreaks of infections.

China’s banking regulator has urged lenders to extend more credit to real estate developers after reports emerged that a growing number of homebuyers have halted mortgage payments on unfinished housing projects across 50 cities.

The European Central Bank is scheduled to meet on Thursday, with economists expecting a 25-bps rate hike. The Bank of Japan is expected to keep its ultra-loose policy in place at its July 20-21 meeting.

This week’s U.S. economic calendar is very light, with reports on housing starts and existing home sales likely to attract attention heading into next week’s FOMC meeting.

Earnings news is likely to take the spotlight, with Bank of America, Goldman Sachs, IBM Corp., Johnson & Johnson, Netflix, Tesla, American Express and Twitter among a slew of big-name companies due to report their quarterly results this week.

U.S. stocks rallied on Friday as a new round of earnings results from Wells Fargo, Citigroup and UnitedHealth coupled with promising retail sales and consumer sentiment data painted a positive picture of the economy.

The Dow jumped 2.2 percent and the S&P 500 surged 1.9 percent to snap five-day losing streaks, while the tech-heavy Nasdaq Composite added 1.8 percent.

European stocks also closed on a strong note Friday after two hawkish Fed policymakers pushed back on the prospect of a 100-bps rate cut.

The pan European Stoxx 600 jumped 1.8 percent. The German DAX soared 2.8 percent, France’s CAC 40 index climbed 2 percent and the U.K.’s FTSE 100 advanced 1.7 percent.

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