Markets optimistic ahead of Fed meeting

investmentnews.com:

Stocks and US equity futures rose as investors awaited policy decisions from the US and Japan this week for near-term trading cues.

The Stoxx Europe 600 edged higher at the open, with consumer products leading the advance as Reckitt Benckiser Group Plc rebounded after last week’s selloff following a legal setback in the US. Futures on the S&P 500 and Nasdaq 100 climbed after Bloomberg reported that Apple Inc. is in talks to build Google’s Gemini artificial intelligence engine into the iPhone, a move that has the potential to shake up the AI industry.

The Federal Reserve’s policy meeting Wednesday may dictate the direction of global stocks for the next quarter. Prior to the blackout period, Chairman Jerome Powell indicated the central bank was close to having the confidence to cut, while others debated how deep, or shallow, those declines will be.  

Bond traders, meanwhile, appear to have painfully surrendered to a higher-for-longer reality. Yields on policy sensitive two-year Treasuries have climbed 11 basis points this month to 4.73%, extending last month’s gain. Swaps traders are pricing about 71 basis points of rate cuts by year-end, down from 134 basis points at the start of the year, according to data compiled by Bloomberg. 

“The Fed may have less confidence on inflation than before, but it still has confidence in the disinflation trend,” and may keep its median forecast of three cuts this year, Bank of America economists including Michael Gapen wrote in a note to clients. “This may be fanciful thinking on our part, but there are several inflation reports and plenty of time between now and June to change course if needed.”

The 10-year Treasury yield held near a three-week high after rising more than 20 basis points