Futures rise on inflation, China in focus: markets wrap

(Bloomberg) — Wall Street stock futures edged higher and European stocks climbed as traders braced for Thursday’s U.S. consumer price data that could show further weakening, bolstering the case for less aggressive rate hikes.

Most read by Bloomberg

S&P 500 and Nasdaq 100 contracts both gained about 0.2%. Shares of Bath & Beyond Inc. surged in premarket trading in the US, rising alongside other meme stocks, with the troubled homewares retailer on track for a third day of gains. Miners were among the outperformers in the Stoxx Europe 600 Index, spurred by optimism that China’s economic reopening will boost demand for metals.

Airline stocks slid in the New York premarket as the failure of a key pilot notification system operated by the Federal Aviation Administration disrupted air travel. American Airlines Group Inc. fell 0.5% and United Airlines Holdings Inc., which said its flights were temporarily suspended, slipped 0.8%. Delta Air Lines Inc. fell 0.9%.

Treasury yields moderated their rise from the previous session, with the 10-year interest rate slipping to just under 3.6% as investors remained focused on the US price outlook. An indicator of the strength of the dollar, held within sight of a seven-month low.

Federal Reserve Chair Jerome Powell refrained from commenting on the monetary policy outlook ahead of the December inflation reading in his remarks on Tuesday. Signs of a slowdown could support a move towards slower rate hikes, although some officials say it’s too early to declare victory over inflation.

“The prospect of a less gloomy economic outlook in both Europe and the US after recession risks have eased in both regions, coupled with the reopening of the Chinese economy, provides strong support for investor risk appetite,” said Pierre Veyret, a technical analyst at ActivTrades. “The lack of clear guidance from Fed Chair Jerome Powell yesterday also helped keep the bullish trading stance alive and most traders will now look to tomorrow’s US inflation data for further clues.”

The story goes on

While not directly commenting on the Fed’s next steps at a forum in Stockholm, Powell said that “restoring price stability when inflation is high may require measures that are unpopular in the short term as we hike rates to slow the economy.” ”

Fed Governor Michelle Bowman said the central bank still had more to do to contain inflation, noting that more tightening was needed.

“We expect a turnaround in central bank policy later this year,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “More risk-tolerant investors can try to anticipate this turnaround by entering markets incrementally, seeking early winners of a global sentiment improvement and identifying beneficiaries of China’s reopening.

“However, we believe we have not yet reached the tipping point in politics or economic growth, and entering 2023 we continue to favor a defensive stance when investing in both equity and bond markets,” said he.

Optimism over demand from China was evident in the iron ore market, with the ingredient used in Singapore’s steel making surged above $120 a tonne. Copper surged above $9,000 a tonne for the first time since June, fueled by hopes of rising consumption by the world’s largest consumer of the metal.

Elsewhere in markets, oil reversed an earlier decline as traders weighed the prospects for stronger Chinese demand against a reported increase in US crude inventories.

Important events this week:

• ECB Governing Council members address the Euromoney conference in Vienna on Wednesday

• US CPI, Initial Jobless Claims, Thursday

• St. Louis Fed President James Bullard at the Wisconsin Bankers Association virtual event, Thursday

• Richmond Fed President Thomas Barkin speaks at the PLA/VA Chamber on Thursday

• China trade Friday

• University of Michigan consumer sentiment, Friday

• Citigroup, JPMorgan, Wells Fargo announce their results on Friday

This week’s MLIVE pulse poll:

Some of the key movements in the markets:

Shares

• S&P 500 futures were up 0.2% as of 7:10 a.m. New York time

• Nasdaq 100 futures up 0.2%

• Futures on the Dow Jones Industrial Average rose 0.1%

• The Stoxx Europe 600 rose 0.6%

• MSCI World Index up 0.2%

currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.1% to $1.0744

• The British pound fell 0.3% to $1.2121

• The Japanese yen fell 0.3% to 132.63 per dollar

cryptocurrencies

• Bitcoin fell 0.2% to $17,429.6

• Ether fell 0.3% to $1,334.89

Bind

• The 10-year government bond yield fell four basis points to 3.58%

• The 10-year German government bond yield fell five basis points to 2.26%

• The 10-year UK government bond yield fell 10 basis points to 3.46%

raw materials

• West Texas Intermediate crude was up 0.4% to $75.44 a barrel

• Gold futures rose 0.6% to $1,887.30 an ounce

This story was created with the support of Bloomberg Automation.

–Assisted by Michael Msika and Brett Miller.

Most Read by Bloomberg Businessweek

©2023 Bloomberg LP