U.S. stock-index futures rose as a strong start to the earnings-reporting season allayed fears of a recession in the world’s largest economy. A selloff in Treasuries resumed with a debate raging around whether inflation is peaking.

June contracts on the Nasdaq 100 and S&P 500 indexes climbed at least 0.7% each as early data showed four out of five companies beating forecasts. Tesla Inc. jumped 7.3% in premarket New York trading after posting record profits that blew past estimates. The 10-year Treasury yield added 4 basis points. The euro and German bund yields rose after hawkish comments from European Central Bank officials. 

Bond bears have returned after Wednesday’s rally in Treasuries fueled by some investors including Bank of America Corp. and Nomura Asset Management who said the panic over inflation and rate-hike bets had gone too far. However, a Federal Reserve anecdotal survey showed inflationary pressures remained strong. Meanwhile, equities stayed resilient to higher yields with their focus on earnings. 

While the peak-inflation debate is intensifying, it’s unlikely to derail global central banks from their tightening path as commodity shortages from the war in Ukraine keep prices elevated. New Zealand inflation accelerated in the first quarter to the fastest pace in 32 years, validating the central bank’s pursuit of an aggressive tightening cycle. 

The U.S. 10-year real yield turned positive on Wednesday for the first time since March 2020 as traders added to bets on an aggressive Fed hiking cycle. However, the level failed to hold for long.

Stock traders are yet to panic over higher rates. While it’s early in the U.S. earnings-reporting season, the signs are encouraging so far. Of the 67 S&P 500 companies that have posted results, 78% have beaten estimates.

Tesla rallied in the early session after reporting better-than-expected first-quarter results and with Elon Musk predicting output will grow at a fast clip for the rest of the year. 

Equities rose in Japan on Thursday. They fell in Hong Kong and China where an address by President Xi Jinping failed to soothe investors pining for more measures to support growth. 

Chinese tech stocks fell for a third consecutive day, weighed by shares linked to electric-vehicle production as lockdowns on the mainland disrupt logistics. Investors have so far been disappointed at Chinese attempts to counter the economic impact of lockdowns. JD.com Inc. and Pinduoduo Inc. fell at least 1.4% each in New York premarket trading.

The U.S. economy grew at a moderate pace through mid-April, but rising prices and geopolitical developments created uncertainty and clouded the outlook for future growth, the Fed said in its Beige Book survey released Wednesday. 

“Strong demand allowed firms to pass through input cost increases in consumers,” Carol Kong, a strategist at Commonwealth Bank of Australia, said in a note. “The anecdotal evidence supports our view the FOMC is well behind the curve and needs to tighten policy aggressively.” 

Investors will be looking for any clues on central bankers’ thinking on rates and inflation when Fed Chair Jerome Powell and ECB President Christine Lagarde discuss the global economy at an International Monetary Fund event Thursday. The Bank of England’s Governor Andrew Bailey is scheduled to speak at a different event.  

European bonds fell, with 10-year bund yields added 7 basis points. Traders are betting on three quarter-point hikes from the ECB this year, after Governing Council member Pierre Wunsch said policy rates could be raised above zero before year-end, with the bank perhaps even deploying “restrictive” policy to get surging prices under control. Adding to the sense of urgency, fellow members Luis de Guindos and Martins Kazaks said a rate hike in July was possible. 

Will value stocks finally outperform growth peers? What will be the best-performing EM stock market for the rest of 2022? “Rotations” is the theme of this week’s MLIV Pulse survey. Participation takes one minute and is anonymous, so please click here to get involved.

What to watch this week:

• Euro zone CPI, U.S. initial jobless claims, Thursday
• Fed Chair Jerome Powell, ECB President Christine Lagarde discuss global economy at IMF event, Thursday
• Manufacturing PMIs: Euro zone, France, Germany, U.K, Friday
• Bank of England’s Andrew Bailey to speak, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.3% as of 10:09 a.m. London time
• Futures on the S&P 500 rose 0.7%
• Futures on the Nasdaq 100 rose 1.1%
• Futures on the Dow Jones Industrial Average rose 0.5%
• The MSCI Asia Pacific Index was little changed
• The MSCI Emerging Markets Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro rose 0.6% to $1.0923
• The Japanese yen fell 0.2% to 128.07 per dollar
• The offshore yuan fell 0.3% to 6.4674 per dollar
• The British pound was little changed at $1.3059

Bonds

• The yield on 10-year Treasuries advanced four basis points to 2.87%
• Germany’s 10-year yield advanced seven basis points to 0.92%
• Britain’s 10-year yield advanced four basis points to 1.96%

Commodities

• Brent crude rose 1.1% to $107.98 a barrel
• Spot gold fell 0.6% to $1,946.18 an ounce

Source by: bloomberg