Wall St poised to join stocks advance, inflation ebbs in Europe

LONDON: 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 was a touch weaker, while crude oil prices rose after a surprise drop in U.S. stockpiles.

Global stocks 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 index of 600 leading companies rose 1.3% to hit a two-week high.

U.S. stock index futures , 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 rose 0.5%. Like the S&P 500 it has recovered from March lows hit as fallout from the collapse of Silicon Valley Bank reverberated around global markets.

Japan's Nikkei, 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 , 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.

Two-year yields were little changed at 4.0804%.

In Asia, investors were cheering plans from Alibaba (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 steadied at $78.79 a barrel, up 0.65%, and gold , which has surged over the past few weeks, was up 0.3% at $1,969 an ounce.

The euro was firmer against the dollar at $1.08755, while bitcoin was up 1% at $28,646 and set for its best quarter for two years.