Wall St poised to join stocks advance, inflation ebbs in Europe
By Huw Jones
LONDON, March 30 (Reuters) -Wall Street readied to join rising global shares which hit their highest level in three weeks on Thursday, underpinned by hopes of that turmoil in the banking sector is over as investors switch to reviewing their end of quarter positions.
Receding inflation in Spain and Germany helped government bonds in the euro zone.
Markets were also looking for guidance on the trajectory for interest rates from the Federal Reserve's most preferred inflation gauge due on Friday, the personal consumption expenditure (PCE) index, and U.S. non-farm payrolls next week.
The dollar =USD was a touch weaker, while crude oil prices rose after a surprise drop in U.S. stockpiles.
Global stocks .MIWD00000PUS were up 0.3% at three-week highs and on course for a 4.9% quarterly gain.
"The next few days are going to be a key test of this stabilisation with month-end, and quarter-end, coming up when you have a lot of funds doing a tidy up, then suddenly it's where do we go from here?" said Mike Hewson, chief markets analyst at CMC Markets.
In Europe, the STOXX .STOXX index of 600 leading companies rose 1.3% to hit a two-week high.
U.S. stock index futures NQcv1, EScv1 were about 0.5% firmer. The rates-sensitive Nasdaq .IXIC is up nearly 14% this year and heading for its best quarter in more than two years.
As the dust settles on a wild and volatile ride after Silicon Valley Bank's collapse unleashed fears of a broader banking crisis, the winners appear to be bonds and large tech companies that tend to benefit when interest rates fall.
Kevin Thozet, investment committee member at Carmignac, said investors were taking stock after a volatile quarter of big swings in the outlook for the economy, inflation and interest rates.
"We are seeing a correlation between risk on and risk off assets working again, which was not the case a year ago," Thozet said, adding the trajectory of hiking interest rates was coming to an end.
"We think there is value is being long in duration, in buying those bonds issued by well-rated issuers in the U.S. or in the euro area," Thozet said.
ASIA HOLD GAINS, ALIBABA UP
Asia's stock markets held recent gains on Thursday as investors weighed whether a break-up of Chinese conglomerate Alibaba signalled Beijing's regulatory storm aimed at tech companies might finally be clearing.
MSCI's index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.5%. Like the S&P 500 .SPX it has recovered from March lows hit as fallout from the collapse of Silicon Valley Bank reverberated around global markets.
Japan's Nikkei .N225, which is heading for a 6% quarterly gain, slipped 0.3% on Thursday.
The U.S. dollar was firm, particularly against the safe-haven Japanese yen JPY=EBS, as investors wound back some of the positions built up in the last couple of weeks.
The yen last traded at 132.495 to the dollar.
From the two-year tenor all the way to the 30-year, U.S. yields are below the current Fed funds rate of roughly 4.8% as markets have dramatically re-priced the rates outlook. FEDWATCH
Two-year yields US2YT=RR were little changed at 4.0804%.
In Asia, investors were cheering plans from Alibaba BABA.N 9988.HK to spin off and separately list its business units as another signal that China wants to welcome back global capital.
"We have repeatedly emphasised that 2023 is the first time in four years that economic, regulatory, and COVID policies have been aligned in a pro-growth, pro-business fashion," Morgan Stanley analysts said.
Alibaba shares in Hong Kong, which rose above HK$300 in 2020, traded up 2.5% at HK$96 on Thursday. The broader Hang Seng .HSI was up 0.6%.
Elsewhere, Brent oil futures LCOc1 steadied at $78.79 a barrel, up 0.65%, and gold XAU=, which has surged over the past few weeks, was up 0.3% at $1,969 an ounce.
The euro EUR=EBS was firmer against the dollar at $1.08755, while bitcoin BTC=BTSP was up 1% at $28,646 and set for its best quarter for two years.
World FX rates YTDhttp://tmsnrt.rs/2egbfVh
Global asset performancehttp://tmsnrt.rs/2yaDPgn
Asian stock marketshttps://tmsnrt.rs/2zpUAr4
Whirlwind month for European bankshttps://tmsnrt.rs/40p8F29
Reporting by Huw Jones, additional reporting by Tom Westbrook; Editing by Sonali Paul, Sam Holmes, Christina Fincher and Alex Richardson
To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA
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