Stocks declined on speculation US inflation data due Wednesday may show price pressures remain sticky, adding to risks policymakers will keep interest rates higher for longer. Climbing oil prices added to the concern.
(Bloomberg) — Stocks declined on speculation US inflation data due Wednesday may show price pressures remain sticky, adding to risks policymakers will keep interest rates higher for longer. Climbing oil prices added to the concern.
An Asian equity gauge headed for the lowest close in almost a week, led by the tech sector after Apple Inc. tumbled on Tuesday. The CPI report may muddy rather than illuminate the Federal Reserve’s policy moves later this year, according to Bloomberg Economics.
“All eyes are on US core CPI later today,” said Chetan Seth, a strategist at Nomura Holdings Inc. in Singapore. “With oil up more than 10% in just over two weeks, stock investors would be hoping not to see a punchy inflation reading tonight as it might give support to the theme of higher-for-longer Fed rate.”
Worries about sticky inflation were also echoed in Europe following a Reuters report that the European Central Bank expects inflation in the euro zone to remain above 3% next year. Euro Stoxx 50 futures fell and German bund futures slipped. The euro was little changed.
West Texas Intermediate climbed for a second day and Brent extended gains above $92 per barrel as production cuts by leaders of OPEC+ added to projections for the tightest supply in a decade. The advance added to inflation outlook.
Tech Rout
US stock futures edged lower after a rout in technology companies Tuesday saw the Nasdaq 100 slide 1.1%. Apple, which unveiled the iPhone 15 and other products, dropped almost 2%.
Treasury two-year yields, which are more sensitive to Fed policy than longer maturities, stayed above 5%, while their 10-year peers held at 4.29%. A US 10-year auction Tuesday drew the highest yield since 2007 as investors demand extra compensation for elevated inflation and rising debt issuance.
The dollar traded in a narrow range against its Group-of-10 peers ahead of the CPI data. The yen weakened for a second day.
Meanwhile, there’s been a “dramatic shift” in investors’ equity allocation, namely a rush toward the US and an exodus from emerging markets, Bank of America Corp.’s latest global fund manager survey showed.
That’s had an impact on emerging-markets equity allocation, which fell to a net 9% overweight in September from 34%, the lowest reading since November 2022. In contrast, allocation to US equities rose 29 percentage points to a net 7% overweight — the first overweight reading since August last year, according to the survey.
Chinese property developers rallied on news that Country Garden Holdings Co. won creditor support to extend repayment on seven yuan bonds.
Key events this week:
- Eurozone industrial production, Wednesday
- UK industrial production, Wednesday
- US CPI, Wednesday
- Tech leaders including Tesla’s Elon Musk and Meta Platforms’ Mark Zuckerberg are set to attend a forum on the future of AI convened by Senator Chuck Schumer, Wednesday
- Japan industrial production, Thursday
- European Central Bank policy meeting and news conference by President Christine Lagarde, Thursday
- US retail sales, PPI, business inventories, initial jobless claims, Thursday
- China property prices, retail sales, industrial production, Friday
- US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 6:30 a.m. London time. The S&P 500 fell 0.6%
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 1.1%
- Euro Stoxx 50 futures fell 0.5%
- Japan’s Topix index rose 0.1%
- Hong Kong’s Hang Seng Index fell 0.1%
- China’s Shanghai Composite Index fell 0.8%
- Australia’s S&P/ASX 200 Index fell 4.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0747
- The Japanese yen fell 0.2% to 147.39 per dollar
- The offshore yuan rose 0.2% to 7.2876 per dollar
- The Australian dollar fell 0.3% to $0.6408
- The British pound was little changed at $1.2488
Cryptocurrencies
- Bitcoin fell 0.7% to $25,879.5
- Ether fell 0.9% to $1,585.05
Bonds
- The yield on 10-year Treasuries was little changed at 4.29%
- Japan’s 10-year yield declined 0.5 basis point to 0.700%
- Australia’s 10-year yield declined two basis points to 4.14%
Commodities
- West Texas Intermediate crude rose 0.3% to $89.12 a barrel
- Spot gold fell 0.1% to $1,910.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller and Youkyung Lee.
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