US equity futures struggled for traction as soft Chinese price data fueled concern about the outlook for the global economy ahead of key American inflation reports later this week.
(Bloomberg) — US equity futures struggled for traction as soft Chinese price data fueled concern about the outlook for the global economy ahead of key American inflation reports later this week.
Futures on the S&P 500 were little changed and those on the Nasdaq 100 slipped after most American equities dropped Friday when wage data showed inflation remains a threat. Treasury yields ticked lower and a gauge of the dollar gained.
Equities have been on the back foot at the start of the second half amid concerns economies will buckle under high rates as central banks keep up the fight against rising prices. US Treasury Secretary Janet Yellen said at the weekend she wouldn’t rule out a US recession, noting inflation remains too high.
“Everyone is looking at inflation or has been looking at inflation for a long time,” Nicolo Bocchin, global head of fixed income at Azimut Group, said on Bloomberg Television. “Now it’s time to look at growth.”
Traders will assess US consumer inflation numbers on Wednesday and producer prices a day later for signals on the Federal Reserve’s likely policy path and the rising risk of a recession. UK jobs data Tuesday will be crucial in determining the Bank of England’s next policy decision in August.
With second-quarter earnings season approaching, investors should expect volatility to pick up in the weeks ahead, said Nigel Green, chief executive of DeVere Group.
“Markets are bracing for what could be the worst reporting season since the end of the pandemic,” Green said. “In the last quarterly earnings, there was a lot of negative guidance. We’re likely to see this having turned out to be correct amid the brewing of a perfect storm of several major economic headwinds.”
The Stoxx Europe 600 index fluctuated after its biggest weekly drop since mid-March. Miners were the leading decliners as iron ore and copper fell. Rio Tinto Group dropped more than 2% after its chairman warned of headwinds from China for raw materials. Bayer AG rose as much as 3.2% after a report it’s planning to spin off its agricultural chemicals business.
An Asia equity benchmark slipped for a fourth day, heading for the lowest close in more than a month. Shares in Hong Kong and mainland China pared gains after Chinese data showed further declines in factory-gate prices while core inflation slowed. The offshore yuan swung to a loss after the data.
Inflation Data
US jobs data last week damped speculation the Fed would leave interest rates unchanged this month. The outlook beyond that is unclear. Payroll figures fell short of estimates but brought signs that wage inflation remains a threat to the Fed’s fight against price gains.
Downside surprises in this week’s inflation indicators could charge up the bulls, taking the S&P 500 above the channel, according to Ed Yardeni, president of his namesake research firm. “On the other hand, higher-than-expected inflation readings could heighten fears that the Fed will have to tighten monetary policy to cause a recession as the only clear way to bring inflation down.”
Oil edged lower Monday after two consecutive weekly increases, and gold edged lower.
Key events this week:
- US wholesale inventories, Monday
- Federal Reserve speakers include Mary Daly, Loretta Mester, Raphael Bostic and Michael Barr, Monday
- Bank of England Governor Andrew Bailey delivers speech, Monday
- St. Louis Fed President James Bullard speaks, Tuesday
- Canada rate decision, Wednesday
- US CPI, Wednesday
- Federal Reserve issues Beige Book, Wednesday
- Federal Reserve speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
- Bank of England Governor Andrew Bailey speaks, Wednesday
- China trade, Thursday
- Eurozone industrial production, Thursday
- US initial jobless claims, PPI, Thursday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 7:04 a.m. New York time
- Nasdaq 100 futures fell 0.3%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.2%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0960
- The British pound fell 0.4% to $1.2790
- The Japanese yen fell 0.2% to 142.47 per dollar
Cryptocurrencies
- Bitcoin was little changed at $30,200.37
- Ether fell 0.4% to $1,862.58
Bonds
- The yield on 10-year Treasuries was little changed at 4.05%
- Germany’s 10-year yield advanced one basis point to 2.65%
- Britain’s 10-year yield was little changed at 4.65%
Commodities
- West Texas Intermediate crude fell 0.8% to $73.27 a barrel
- Gold futures fell 0.2% to $1,929.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi, Ran Li and Tassia Sipahutar.
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