European Stocks Climb After Records on Wall Street: Markets Wrap

(Bloomberg) — European stocks rose, tracking a record S&P 500 close, on optimism about US interest-rate cuts after Federal Reserve Chair Jerome Powell said inflation is getting back on a downward path.

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Shares in most European industry groups were in the green as the regional Stoxx 600 index advanced 0.5%, led by miners and technology companies. The spotlight continues to be on politics, on the eve of elections in the UK. In France, the benchmark CAC 40 index rose as anti-National Rally parties attempt to prevent Marine Le Pen’s far-right group from achieving an absolute majority in the next round of legislative voting.

US equity futures were steady ahead of a session on Wall Street that will be shortened because of the July 4 holiday. The S&P 500 closed above 5,500 for the first time on Tuesday, its 32nd record this year. The Nasdaq 100 also set an all-time high with its first close above 20,000.

US stocks keep defying doomsayers amid solid corporate earnings, AI mania and expectations that interest rates will drop, adding more than $16 trillion to the S&P 500’s value from a closing low on October 2022. A lack of any meaningful pullback has given bulls conviction that the rally is sustainable.

The new record high close in the S&P 500 and Nasdaq “could also be taken as another win given the psychological significance that ‘round numbers’ hold,” said Chris Weston, head of research at Pepperstone Group in Melbourne.

Investors are looking to US initial jobless claims and ADP employment data due Wednesday to gain more clues on the policy outlook. Fed Chair Powell acknowledged the central bank has made “quite a bit of progress” in reducing inflation but emphasized officials need more evidence before lowering interest rates.

Markets are also gearing up for the all-important US payrolls reading due Friday. Economists expect the report to show employers added about 190,000 workers in June and the unemployment rate likely held at 4%.

Asian stocks headed for their longest stretch of gains since May. Japanese equities climbed, with the benchmarks now less than 1% from their record highs. In China, services activity expanded at the slowest pace in eight months in June, a private gauge showed, a slowdown that may add to worries over the economy’s outlook. Stocks in Hong Kong gained, while those on the mainland fell.

In other markets, Australia’s three-year bond yield extended its rise after better-than-expected retail sales data reinforced the case for a rate hike.

Elsewhere, oil climbed to near a two-month high, while the Bloomberg Dollar Spot Index and Treasury yields were little changed.

Key events this week:

Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
US Fed minutes, ADP employment, ISM Services, factory orders, initial jobless claims, durable goods, Wednesday
Fed’s John Williams speaks, Wednesday
UK general election, Thursday
US Independence Day holiday, Thursday
Eurozone retail sales, Friday
US jobs report, Friday
Fed’s John Williams speaks, Friday