European bonds and stocks fell after the latest round of price data suggested inflation may not yet be fully on the retreat in the euro region.
(Bloomberg) — European bonds and stocks fell after the latest round of price data suggested inflation may not yet be fully on the retreat in the euro region.
Germany’s 10-year yield jumped as much as seven basis points to 2.58% after reports showed inflation accelerated in four of six German states in August, ahead of figures for the overall German economy due later Wednesday. A separate report showed Spanish inflation also quickened.
Utilities led the decline in the Stoxx Europe 600 dropped, as Orsted A/S plunged more than 20% after the Danish power generator forecast potential impairments of up to $2.3 billion relating to its US portfolio. Among other individual movers, Prudential Plc climbed more than 4% after posting a rise in new business profit.
The German and Spanish inflation data muddied the waters for European policy makers as they approach the September rates decision. Market pricing implies roughly even odds of a quarter-point increase by the European Central Bank to 4%. Further clouding the outlook was data showing that euro-area economic confidence slowed more than anticipated this month.
US equity futures edged lower as traders awaited the next batch of data for more clues on the outlook for the economy and interest rates. The S&P 500 jumped by the most since June on Tuesday after unexpectedly soft jobs and consumer-confidence readings in the US raised hopes the Federal Reserve may be nearing the end of its tightening cycle.
HP Inc. slumped almost 10% in premarket trading after the technology hardware company cut its full-year cash flow and profit outlook. Treasury yields ticked higher and a gauge of the dollar was steady.
Investors will monitor reports on US economic growth and private-sector employment later Wednesday, as well as key non-farm payrolls numbers on Friday, to further ascertain the economy’s resilience amid high interest rates.
“Data is king right now in terms of market sentiment,” said Susannah Streeter, an analyst at Hargreaves Lansdown Plc. “The non-farm payroll snapshot on Friday will crown the week, and if it points to a fresh slowdown in hiring, we could see another spurt in stock prices.”
In Asia, the MSCI Asia Pacific Index came off its highs as the strong rally in Chinese equity markets gradually evaporated. Benchmarks had earlier rallied, with the Hang Seng Index rising as much as 1.4%, after Chinese state-owned lenders were reported to prepare to reduce rates on the majority of outstanding mortgages, as well as on deposits.
“These little piecemeal policy shifts are probably very good in the short term for sentiment, but they don’t necessarily create this sort of surge in terms of the local economy,” Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, said on Bloomberg Television. “There are still bigger issues at play here that I think are holding investors back still at this particular point.”
Elsewhere, the crypto space traded lower after Bitcoin jumped more than 6% in the previous session as a US court ruling potentially paved the way for the country’s first Bitcoin exchange-traded fund.
In commodities, West Texas Intermediate rose for a fifth day, set to match the winning streak last seen in March, on signs of tighter market. Gold steadied after rising to the highest since early August on easing Fed rate hike bets.
Key events this week:
- US GDP, wholesale inventories, pending home sales, Wednesday
- China manufacturing PMI, non-manufacturing PMI, Thursday
- Japan industrial production, retail sales, Thursday
- Eurozone CPI, unemployment, Thursday
- ECB publishes account of July monetary policy meeting, Thursday
- US personal spending and income, initial jobless claims, Thursday
- China Caixin manufacturing PMI, Friday
- Eurozone S&P Global Eurozone Manufacturing PMI, Friday
- South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
- Boston Fed President Susan Collins speaks at virtual event, Friday
- US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.4% as of 10:47 a.m. London time
- S&P 500 futures fell 0.2%
- Nasdaq 100 futures fell 0.3%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.4%
- The MSCI Emerging Markets Index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0886
- The Japanese yen fell 0.3% to 146.28 per dollar
- The offshore yuan fell 0.2% to 7.2993 per dollar
- The British pound rose 0.1% to $1.2658
Cryptocurrencies
- Bitcoin fell 0.6% to $27,404.2
- Ether fell 0.6% to $1,715.48
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.14%
- Germany’s 10-year yield advanced six basis points to 2.57%
- Britain’s 10-year yield advanced one basis point to 4.44%
Commodities
- Brent crude rose 0.5% to $85.88 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani, Tassia Sipahutar and Lars Mucklejohn.
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