Stocks, futures gain as rate-hike bets scaled back

The technology sector spurred a climb in stocks Friday as investors evaluated economic threats and scaled back expectations for inflation and interest-rate hikes.

The Stoxx Europe 600 rose more than 1 per cent, with technology and utilities outperforming. The benchmark is set for a small bounce this week. The tech-heavy Nasdaq 100 futures added 1 per cent while contracts on the S&P 500 gained 0.8 per cent, after the main US stock gauge closed near session highs Thursday, adding more than 3 per cent in three days.

Investors are grappling with the question of what comes next if an economic downturn takes hold. One scenario comprises cooling price pressures and hence scope for central banks to ease up on the pace of interest-rate hikes. Federal Reserve Chair Jerome Powell hardened his resolve to cool inflation in testimony to lawmakers this week, after acknowledging that a recession may be the price to pay.

“In spite of the hawkish remarks from Fed officials, the growing worries that their hikes would trigger a recession actually meant that investors priced in a shallower pace of rate hikes over the coming 12-18 months,” Deutsche Bank AG strategists led by Jim Reid wrote in a note. “That had a knock-on impact on Treasuries.”