Wall Street equity futures were steady and European stocks climbed as traders prepared for US inflation data Thursday that may show further softening, bolstering the case for less-aggressive interest-rate hikes.
(Bloomberg) — Wall Street equity futures were steady and European stocks climbed as traders prepared for US inflation data Thursday that may show further softening, bolstering the case for less-aggressive interest-rate hikes.
S&P 500 and Nasdaq 100 contracts pared an earlier advance. Bath & Beyond Inc. shares surged in US premarket trading, rising alongside fellow meme stocks, with the troubled home-goods retailer on course for a third day of gains. Real-estate stocks led gains in the Stoxx Europe 600 Index amid subsiding inflation worries. Miners were boosted by optimism China’s economic reopening will spur demand for metals.
Airline stocks slipped in 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 1.1% and United Airlines Holdings Inc. was down 0.6%. Delta Air Lines Inc. fell 0.8%.
Treasury yields trimmed their advance from the previous session, with the rate on 10-year debt slipping to just below 3.6% as investors remained focused on the price outlook for the US. A gauge of dollar strength held within sight of a seven-month low.
Federal Reserve Chair Jerome Powell in remarks Tuesday refrained from commenting on the outlook for monetary policy before the December consumer price index figures. Signs of cooling could support a move toward slower rate increases, even as some officials say it’s too early to declare victory over inflation.
“The prospect of a less cloudy economic outlook in both Europe and the US after recession risks in both regions eased back, combined with the reopening of the Chinese economy, is providing strong support toward risk appetite from investors,” said Pierre Veyret, a technical analyst at ActivTrades. “The lack of clear hints from Fed Chairman Jerome Powell yesterday also contributed to keeping the bullish trading stance alive, and most traders will now look toward tomorrow’s US inflation print for further clues.”
While Powell didn’t directly comment on the Fed’s next steps at a forum in Stockholm, he did say that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise rates to slow the economy.”
Fed Governor Michelle Bowman said the central bank has more work to do to curb inflation, noting that further tightening is needed.
“We do expect an inflection in central bank policy later on this year,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “More risk-tolerant investors can look to anticipate this turn by phasing into markets, seeking early winners from a global improvement in sentiment, and identifying beneficiaries from China’s reopening.
“However, we don’t believe we have yet reached the inflection point in policy or economic growth, and as we enter 2023 we continue to favor a defensive tilt when adding exposure in both equity and fixed-income markets,” he said.
Optimism over demand from China was evident in the iron ore market, with the steel-making ingredient rallying above $120 a ton in Singapore. Copper rose above $9,000 a ton for the first time since June, fueled by hopes of increased consumption by the world’s top user of the metal.
Elsewhere in markets, oil reversed an earlier decline as traders weighed the outlook for stronger Chinese demand against a reported build in US crude stockpiles.
Key events this week:
- ECB Governing Council members speak at Euromoney conference in Vienna, Wednesday
- US CPI, initial jobless claims, Thursday
- St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday
- Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday
- China trade, Friday
- US University of Michigan consumer sentiment, Friday
- Citigroup, JPMorgan, Wells Fargo report earnings, Friday
This week’s MLIVE Pulse Survey:
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 7:24 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was unchanged at $1.0733
- The British pound fell 0.3% to $1.2112
- The Japanese yen fell 0.3% to 132.64 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to $17,418.49
- Ether fell 0.4% to $1,334
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.58%
- Germany’s 10-year yield declined six basis points to 2.25%
- Britain’s 10-year yield declined 11 basis points to 3.45%
Commodities
- West Texas Intermediate crude rose 0.5% to $75.51 a barrel
- Gold futures rose 0.4% to $1,883.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Msika and Brett Miller.
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