Morning Deal: Stocks soar as Sweden slips, oil slips

A look at the day ahead in US and global markets from Mike Dolan

Wall Street appears to have shrugged off the latest rumblings from the Federal Reserve and Disney’s giant swoon, with European shares chasing new highs as Sweden becomes the latest G10 central bank to cut interest rates and oil prices tumble.

Treasury futures and yields held fairly steady overnight, even after Minneapolis Fed chief and noted hawk Neel Kashkari said all policy options were on the table to bring inflation back into the bottle.

“If we have to keep rates where they are for an extended period of time to put the brakes on the economy, or even if we need to raise, we would do what we need to do to bring inflation down again,” Kashkari said.

Seen as likely an outlier and not even a voting member of the Fed’s policy-making committee this year, markets appeared to shrug off the comments.

Helped by strong demand for Tuesday’s massive $58 billion sale of three-year notes and another sharp drop in crude oil prices, Treasury yields were relatively calm, entering a $42 billion auction on 10 years later on Wednesday.

Crude oil prices fell to their lowest level since March 11 as industry data showed a build-up in US inventories – a sign of weakening demand – and cautious supply expectations emerged ahead of next month’s OPEC+ policy meeting.

U.S. crude oil inventories rose by 509,000 barrels in the week ended May 3, sources said, citing figures from the American Petroleum Institute, and gasoline and distillate stocks also rose. Official US government data is available later in the day.

And European stocks looked poised to hit record highs as Sweden cut interest rates on Wednesday and underscored the divergence between European central bank policymaking and the Fed’s.

Sweden’s central bank cut its key interest rate to 3.75% from 4.00% as expected and said it was likely to cut twice more in the second half of the year if the outlook for inflation are still maintained.

After eight rate hikes in Sweden, inflation is now close to the Riksbank’s 2% target after peaking above 10%.

The Riksbank is the second of the G10 major central banks to ease it, with the Swiss National Bank jumping the gun in March.

And crucially, the crown weakened only marginally.

With the European Central Bank now expected to cut rates next month, attention turns to Thursday’s Bank of England meeting. While no move is expected in the UK this week, there is considerable speculation that the BoE could open the door to an interest rate cut in June as well.

Britain’s benchmark FTSE 100 hit a new record high on Tuesday, 10-year gold yields fell to their lowest in nearly four weeks and the pound fell.

The big picture has kept the dollar broadly supported – particularly against the struggling Japanese yen. Dollar/yen climbed back above 155 despite fresh warnings from Japanese authorities about repeated interventions to sell dollars.

Asian shares bucked the trend in the US and Europe and faltered earlier, with Tokyo, Shanghai and Hong Kong all finishing in the red.

Back on Wall Street, gains on Tuesday and futures steady overnight survived another pullback in Tesla and Walt Disney down 10%. Disney fell as a surprise profit in its streaming entertainment division was overshadowed by a decline in its traditional television business and weaker box office.

Shares in electric pickup maker Rivian fell about 5 percent overnight in after-hours trading as it stuck to 2024 production forecasts well below Wall Street targets and reported a bigger loss than expected in the first quarter, when it ended with a week. long stoppage of production.

Key items from the journal that may provide direction for US markets later Wednesday:

*Federal Reserve Vice Chairman Philip Jefferson, Fed Board Governor Lisa Cook and Boston Fed President Susan Collins are speaking

* US Corporate Revenue: Uber, News Corp, Airbnb, Emerson Electric, Corpay, Celanese, Atmos Energy, NiSource, STERIS, Broadridge Financial Solutions

* Chinese President Xi Jinping in Serbia and Hungary as part of a week-long visit to Europe

* US Treasury auctions $42 billion of 10-year notes

(By Mike Dolan, Editing by Nick Macfie [email protected])