U.S. Stocks, futures extend rally as dollar tumbles

European stocks and US futures extended a rally and the dollar retreated as traders bet inflation is near peaking even as policy makers ramp up hawkish rhetoric.

The Stoxx Europe 600 index climbed for a third day, with retailers and miners leading the advance and all major regional benchmarks in the green. Futures on the S&P 500 and Nasdaq 100 rose, suggesting US stocks may add to last week’s gains. Treasury yields ticked lower. Crude oil turned higher along with industrial metals.

A gauge of the dollar fell for a second day, on track for its biggest two-day drop in almost three months, as all G-10 peers surged expect the yen. The euro jumped the most in six months after Bundesbank President Joachim Nagel signaled support for further interest-rate hikes in Europe, while news of Ukrainian gains in the war against Russia also boosted sentiment. Sweden’s krona soared 1.7 per cent as a coalition of right-wing parties looks set to secure a narrow victory in a general election.

Investor focus is on August US inflation data due Tuesday, with headline CPI expected to cool to an 8 per cent a year pace while the core measure that excludes food and energy is seen accelerating. Traders almost fully expect another jumbo-sized Fed hike next week, following two 75-basis-point increases, and forward guidance by Fed officials has supported that view.