(Bloomberg) — Global stocks struggled to hold onto gains as traders prepared for a week packed with US data that will shed light on the health of the world’s largest economy and the outlook for Federal Reserve interest rates.
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Europe’s Stoxx 600 index erased a 0.5% advance, while US futures and Asian stocks retreated from their earlier highs. In London, BT Group Plc rallied more than 7% after Bharti Global agreed to buy a stake of about 24.5% in the UK carrier.
There was some relief from the volatility that ripped through markets last week, fueled by concerns the Fed is waiting too long to cut rates. The Cboe Volatility Index — Wall Street’s so-called fear gauge — has retreated from its highest levels since the early days of the Covid-19 pandemic.
“Markets may stay on edge this summer as they look to decipher the underlying strength of the US economy and as valuation and technical extremes unwind,” said Seema Shah, chief global strategist at Principal Asset Management. “Strong household and corporate balance sheets suggest economic weakness should be limited.”
In currencies, the yen dropped the most against the dollar among major peers. That followed last week’s surge as traders slashed bearish bets in the wake of the Bank of Japan’s July 31 rate hike. The BOJ’s move prompted investors to dump carry trades, unleashing turmoil that ricocheted across global markets.
There’s no certainty the relative calm will continue, with Wednesday’s US inflation data the key volatility event for the week. According to Citigroup Inc., traders are positioning for the S&P 500 to move 1.2% in either direction when the consumer price index report is released.
Meanwhile, as bond markets have moved to account for a Fed that is “behind the curve,” the risk isn’t “priced into current equity multiples,” according to Morgan Stanley strategists. The team led by Michael Wilson said economic growth is the primary concern for investors, rather than inflation and rates.
“Markets are looking for better growth or more policy support to…
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