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Futures Rise as Shutdown Averted; Dollar Slips: Markets Wrap

(Bloomberg) — European stocks and U.S. index futures advanced as a deal to avoid a government shutdown in Washington and central-bank assurances about transitory inflation boosted economic optimism.

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Contracts on the S&P 500 Index rose 0.9% after the underlying gauge rebounded from a two-month low on Wednesday. The dollar halted a four-day rally, while Treasury yields edged up. Asian stocks trimmed losses amid gains in China before a weeklong holiday.

An agreement among U.S. lawmakers to extend government funding removes one uncertainty from a litany of risks that investors are contending with, ranging from China’s growth slowdown to Federal Reserve tapering. Fed Chair Jerome Powell and his European counterpart Christine Lagarde have reiterated their view inflation is transitory, providing a leg-up to risktakers. Dip buyers are now returning, helping an equity selloff sparked by rising bond yields to ease.

In Europe, the Stoxx 600 equities gauge trimmed a monthly loss as renewed optimism over the economic recovery outweighed concerns over rising bond yields. Miners paced the gains as iron ore climbed.

Oil steadied from a two-day slump as it headed for a monthly gain amid tighter supplies. West Texas Intermediate futures were 0.3% higher, while Brent contracts were little changed.

Senate Majority Leader Chuck Schumer said Wednesday lawmakers had reached an agreement to avoid a government shutdown on Friday, extending government spending until Dec. 3. Earlier, Powell and his counterparts in Japan, Europe and the U.K. voiced cautious optimism that supply-chain disruptions lifting inflation rates around the world would ultimately prove temporary.

Asian stocks erased losses on a volatile day as investors weighed further evidence of a slowdown in China. Factory activity in the world’s second-largest economy contracted in September for the first time in the pandemic era.

Investors are finishing the third quarter concerned about global growth amid inflationary pressures, a looming energy crisis, supply chain bottlenecks and regulatory risks emanating from China. A majority harbor fears of persistently high inflation, with a 20% pullback in stocks seen as more likely than a 20% rally, according to a Citigroup Inc. survey of clients. Global stocks are poised to decline for the first quarter in six.

Here are some events to watch this week:

  • House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday

  • Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.9% as of 8:49 a.m. London time

  • Futures on the S&P 500 rose 0.8%

  • Futures on the Nasdaq 100 rose 0.9%

  • Futures on the Dow Jones Industrial Average rose 0.8%

  • The MSCI Asia Pacific Index was little changed

  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro was little changed at $1.1607

  • The Japanese yen was little changed at 111.93 per dollar

  • The offshore yuan rose 0.1% to 6.4686 per dollar

  • The British pound was little changed at $1.3437

Bonds

  • The yield on 10-year Treasuries advanced two basis points to 1.53%

  • Germany’s 10-year yield advanced one basis point to -0.20%

  • Britain’s 10-year yield advanced two basis points to 1.01%

Commodities

  • Brent crude rose 0.1% to $78.72 a barrel

  • Spot gold rose 0.3% to $1,731.46 an ounce

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