US futures and European stocks struggled for direction as investors awaited data for clues on monetary policy and assessed developments in the banking sector. Treasuries fell.
(Bloomberg) — US futures and European stocks struggled for direction as investors awaited data for clues on monetary policy and assessed developments in the banking sector. Treasuries fell.
Contracts on the S&P 500 were little changed, while those on the Nasdaq 100 dropped. European equities erased earlier gains as French lenders fell on news the country’s financial prosecutor is searching five banks as part of a probe into tax fraud and money laundering.
First Republic Bank climbed in premarket trading, set to extend Monday’s advance. Alibaba Group Holding Ltd. rallied more than 7% as the e-commerce firm plans to split into six units that will individually raise funds and explore initial public offerings.
Traders began this week on a bullish note, ahead of a busy calendar for economic reports and speeches by Federal Reserve officials. Still, Tuesday’s moves suggest lingering caution after turmoil in the banking sector fueled worries of recession and wider contagion earlier this month. A report on the Fed’s preferred measure of inflation later this week will be closely watched, while data on consumer confidence is due today.
The US two-year Treasury yield rose further after surging above 4% on Monday. A gauge of dollar strength traded lower.
Meanwhile, swaps traders priced in more than a 50% probability that the Federal Reserve will lift rates by a quarter point at its next gathering. They continue to expect sharp easing thereafter, with pricing suggesting the policy rate will slide to around 4.3% in December, down from around 4.95% in May.
Not all agree.
“We see major central banks moving away from a ‘whatever it takes’ approach, stopping their hikes and entering a more nuanced phase that’s less about a relentless fight against inflation but still one where they can’t cut rates,” strategists at BlackRock Investment Institute, including Wei Li and Alex Brazier, wrote in a note.
Hugh Gimber, global market strategist at JPMorgan Asset Management, also doesn’t foresee rate cuts anytime soon, even if hikes pause, and cautions against stock-market optimism on it.
“I think the market is right to price a Fed pause,” he said in an interview on Bloomberg TV. “The question here is how big the feed through from a deterioration in lending standards is to really get inflation lower towards target, and I’m not that convinced we will see that very quickly. I think we would need a pretty significant economic shock to get there in 2H. Rate cuts are more of a 2024 story.”
Elsewhere in markets, Asian shares rose as traders caught up with overnight gains on Wall Street. The yen strengthened after Japan’s cabinet approved the use of some funds from the fiscal 2022 budget for measures to cushion the impact of inflation.
Bitcoin fell, extending declines from Monday, when the US Commodity Futures Trading Commission sued Binance Holdings Ltd. for allegedly breaking trading and derivatives rules. Oil rose.
Key events this week:
- US wholesale inventories, US Conf. Board consumer confidence, Tuesday
- EIA Crude Oil Inventory Report, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 6:59 a.m. New York time
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 was little changed
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.2% to $1.0823
- The British pound rose 0.2% to $1.2313
- The Japanese yen rose 0.5% to 130.96 per dollar
Cryptocurrencies
- Bitcoin fell 1.1% to $26,746.66
- Ether rose 0.6% to $1,717.54
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.55%
- Germany’s 10-year yield advanced seven basis points to 2.30%
- Britain’s 10-year yield advanced 10 basis points to 3.47%
Commodities
- West Texas Intermediate crude rose 0.2% to $72.97 a barrel
- Gold futures rose 0.2% to $1,975 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott, Tassia Sipahutar and Allegra Catelli.
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