Stocks were poised to extend gains ahead of policy decisions by the European Central Bank and Bank of England, which follow the Federal Reserve’s pivot toward higher interest rates.
Futures for the S&P 500 rose 0.5% Thursday, a day after the broad stocks gauge closed at its second-highest level on record. Contracts for the Dow Jones Industrial Average added 0.4% and Nasdaq-100 futures climbed 0.6%, pointing to a strong start to the session for technology stocks.
Brent-crude futures, the benchmark in international oil markets, rose 0.9% to $74.51 a barrel. Yields on 10-year Treasury notes ticked down to 1.451% Thursday from 1.460% Wednesday. Yields move in the opposite direction to bond prices and barely moved in response to the Fed’s shift to tighten monetary policy.
Stocks rallied when the central bank completed that pivot Wednesday, approving plans to end a program of asset purchases by March and penciling in three rate rises in 2022. Investors said the change of stance—ending months in which the Fed said higher inflation would fade—removed the risk of runaway growth in consumer prices.
“There’s a goldilocks interpretation,” said Edward Park, chief investment officer at Brooks Macdonald, referring to a situation in which the Fed tames inflation but doesn’t push rates high enough to kill the economic recovery.
Mr. Park said stocks are likely to keep rising through to year end. “You have people saying, you know, it’s painful being in fixed income or cash.”
European stock markets followed Wall Street higher Thursday. The pan-continental Stoxx Europe 600 rose 1.4%, led by tech, energy, travel and leisure stocks.
Turkey’s currency crisis deepened ahead of a potential interest-rate cut by the central bank, which has come under pressure from President Recep Tayyip Erdogan to lower borrowing costs. The lira weakened 2.5% to trade at 15.18 per dollar.
Like the U.S., the eurozone and the U.K. are experiencing their highest inflation in years. Central banks there are also contending with waves of coronavirus infections that complicate the outlook for consumer prices and economic growth.
The Bank of England, which will publish its decision at 7 a.m. ET, was until recently expected to raise interest rates Thursday. However, a jump in Covid-19 cases driven by the Omicron variant might encourage the central bank to keep policy on hold, Mr. Park said. The pound rose 0.2% to $1.3293 before the decision.
The European Central Bank, meanwhile, is expected to signal that it will continue buying bonds for some time, and that it won’t increase interest rates next year. The central bank is due to publish its decision at 7:45 a.m. The euro traded 0.2% higher at $1.1316.
Investors will parse surveys of purchasing managers in the U.S. and Europe for evidence of the extent to which rising coronavirus cases have knocked economic growth. The reports—due at 9:45 a.m. for the U.S.—are expected to show factory output is growing, though at a slower pace than in November.
In individual European stock moves, Novartis rose 4.3% after the Swiss pharmaceutical firm said it would use the proceeds from the recent sale of its stake in Roche to buy back up to $15 billion of its shares. Food-delivery firms Just Eat Takeaway.com and Delivery Hero both rose more than 5%. Électricité de France dropped 11% after the French utility cut earnings forecasts to reflect the safety-related outages at nuclear-power plants.
In Asia, Japan’s Nikkei 225 gained 2.1%, the Shanghai Composite Index rose 0.8% and Hong Kong’s Hang Seng added 0.2%.