New records for stocks as quarterly gain approaches

Global equities advance but markets await Fed inflation data.

Stocks hit fresh records as global equities headed for a second quarterly gain. Treasuries slipped, with investors awaiting US jobs data.

Europe’s Stoxx 600 Index advanced 0.3% to a record, while US futures pointed to a restrained start for Wall Street after the S&P 500 Index closed at its highest level ever. Investors will be keeping an eye on US initial jobless claims data due later in the day.

“Optimism has surged, thanks notably to central banks which have been reassuring regarding upcoming rate cuts,” said Arnaud Cayla, deputy CEO at Cholet Dupont Asset Management. “Investors have no reason to sell.”

MSCI Inc.’s global stocks index is on course to rise more than 7% this quarter and is hovering near its own all-time high, supported by rallies in the US, Japan and the artificial intelligence sector.

Moves were relatively muted, with many institutional investors potentially rebalancing their portfolios as Thursday is the last trading day of the quarter for some markets.

Among individual stocks, JD Sports Fashion Plc jumped after maintaining its profit forecast. Soitec plunged after the French chip maker’s disappointing revenue outlook.

Yields on Treasuries climbed following Fed Governor Christopher Waller’s remarks that there is no rush to lower interest rates, and he wants to see “at least a couple months of better inflation data” before cutting. Two-year Treasury yields, which are more sensitive to policy moves, rose more than four basis points. The dollar strengthened against most of its Group-of-10 peers.

“We believe that the current market easing expectations for the Fed still need to adjust,” Win Thin and Elias Haddad, strategists at Brown Brothers Harriman, wrote in a note. “When they do, the dollar should gain even further.”

‘TREADING WATER’

The yen steadied after reaching its weakest level in about 34 years against the dollar on Wednesday. The Japanese currency had weakened to 151.97, beyond the level at which policymakers stepped in during October 2022.

Still, investors were “basically treading water” before the release of the Fed’s preferred inflation gauge — the core personal consumption expenditures price index — on Friday, when markets will be closed.

“Ultimately, no one wants to make bold moves heading into a high-impact data release that drops on a public holiday,” said Kyle Rodda, senior market analyst at Capital.Com Inc. “A hot inflation print raises pretty meaningful downside risks for equities given the fears that price growth could be accelerating, if not reanchoring higher.”

Meanwhile, after the S&P 500 soared about 25% since late October, many have flagged concern that positioning is stretched and stocks are more vulnerable to short-term profit taking. JPMorgan Chase & Co.’s Dubravko Lakos-Bujas warned clients Wednesday that they could be “stuck on the wrong side” of the momentum trade when it eventually falters.

In commodities, oil climbed and was headed for a solid quarterly gain on expectations OPEC+ supply cuts would tighten the global market. Gold steadied Thursday after a three-day rally.

Key events this week:

UK GDP revision, Thursday
US University of Michigan consumer sentiment, initial jobless claims, GDP, Thursday
Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
US personal income and spending, PCE deflator, Friday
Good Friday. Exchanges closed in US and many other countries in observance of holiday. US federal government is open.
San Francisco Fed President Mary Daly speaks, Friday
Fed Chair Jerome Powell speaks, Friday

Stocks