Stocks are up, the euro inch higher in the big week for the markets

LONDON (Reuters) – Global stock markets got off to a strong start on Monday and the euro pulled out of parity as market participants scaled back their bets on a Federal Reserve interest rate hike next week and on optimism spurred by central bank pledges. support the Chinese economy.

US stock futures are up more than 1% while European stock indices have been a sea of ​​green in a big week for the region.

The European Central Bank is set to raise interest rates for the first time in more than a decade on Thursday, the same day the European Union hopes Russia will restore gas supplies. Meanwhile, Italy is once again in the grip of a political crisis. Read more

Pan-European STOXX 600 Index (.stoxx) It was up 1.3% by 1030 GMT after posting a 0.8% drop last week. Monday’s gains were broad-based, led by miners (.SXPP)energy stock (.SXEP) and banks (.SX7P).

“It’s a turbulent week this week, there’s a lot going on,” said James Rossiter, chief global strategist at TD Securities.

“The ECB is very much in focus, there is not much room to surprise the ECB, I think 25 basis points are locked … then there is Italy and Nord Stream as well.”

Borrowing costs in Italy soared on Monday, and demand from premium investors for holding Italian debt over safer German securities was at its widest level in a month as political turmoil continued in Europe’s fourth-largest economy.

Prime Minister Mario Draghi attempted to resign from his post on Thursday after the 5-Star Movement, a coalition partner, failed to support him in a confidence vote. The Italian president rejected Draghi’s resignation. Read more

Draghi is expected to address parliament on Wednesday, but the Italian 10-year bond yield rose 10 basis points on Monday to 3.48%, pushing the closely watched spread on German bond yields to its widest level in more than a month. . 235 basis points.

“We expect volatility to remain high until then in response to various rumors on whether he will remain firm about his resignation or whether he is willing to stay in place,” UniCredit analysts said in a note.

“Any indicator that could increase the likelihood of early elections would ultimately be negative for BTPs and lead to a wider spread.”

Overnight, the gauge of Asian stocks (MIAPJ0000PUS.) It rose more than 1%, its biggest daily rise in nearly two months, buoyed by a jump in Chinese stocks as regulators encouraged lenders to make loans on eligible real estate projects.

It also came as the dollar, which had the strongest start to a year in recent memory, fell on Monday. / FRX

Uncertainty will haunt the European Central Bank at a policy meeting where it is likely to start a tightening cycle with a 25 basis point increase, with markets commenting on details of an anti-fragmentation tool aimed at easing pressure on borrowing costs for the bloc’s most indebted countries. Individuals. Read more

Friday’s rally on Wall Street reverberated through global markets with MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) Up 1.4% after falling 3.5% last week.

A broader index of global stocks (.MIWO00000PUS.) It was up 0.4%.

Chinese blue chips (.CSI300) It added 1.0% as the country’s central bank chief pledged to help the economy, although Shanghai also announced more region-wide coronavirus tests. Read more

Traders are back in expectation of a 75 basis point rate hike from the Federal Reserve next week, after courting the prospect of a 100 basis point move to curb inflation.

“We don’t think central banks will be able to raise interest rates to the extent that they or market expectations are given headwinds to already moderate economic growth,” said Steve Ellis, global head of fixed income information at Fidelity International.

Corporate earnings will be in sharp focus this week with Goldman Sachs Group Inc (GS.N)Bank of America Corp (BAC.N)International Business Corporation (IBM.N)Netflix, Inc (NFLX.O)and Tesla Inc.O and Twitter Inc (TWTR.N) because of the report.

Of the 35 companies in the Standard & Poor’s 500 that reported this, 80% beat analysts’ expectations, according to Refinitiv. Analysts now expect second-quarter total earnings to grow year-on-year at 5.6%, down from 6.8% at the start of the quarter.

Higher interest rates and a firm dollar were a major drag on unprofitable gold, which remained stuck at $1,713 an ounce after losing 2% last week.

Oil prices rose in a wave of risk. President Joe Biden has continued his trip to the Middle East in the hope of securing an agreement on increasing production, after apparently leaving Saudi Arabia empty-handed.

After an early drop, Brent crude added $2.54, or 2.5%, to $103.70 a barrel, after rising 2.1% on Friday.

Additional reporting by Mark Jones in London. Editing by Kirsten Donovan and Bernadette Baum

Our criteria: Thomson Reuters Trust Principles.