US equity futures fluctuated and Treasury yields fell after year-over-year US inflation data came in higher than expected, opening the door to further rate hikes by the Federal Reserve.
(Bloomberg) — US equity futures fluctuated and Treasury yields fell after year-over-year US inflation data came in higher than expected, opening the door to further rate hikes by the Federal Reserve.
The consumer price index showed that inflation accelerated in January by the most in three months, though in line with expectations. Housing contributed the most to the monthly increase, while food, gasoline and natural gas also added upward pressure.
“This isn’t a scary number that some of the market feared,” said Lindsay Rosner, multisector portfolio manager at PGIM Fixed Income:
“The Fed is as uncertain on the inflation outcome as we are,” said Adam Cole, head of currency strategy at RBC Europe in London. “Whether bond yields retest the highs and whether we get another phase of the equity selloff — it’s all the same trade: it’s whether or not inflation has peaked.”
Bank of America Corp.’s latest global fund manager survey suggests that while equity markets are on a relentless march higher amid optimism around stronger economic growth and cooling inflation, most investors aren’t convinced the gains will last.
About 66% of participants in the bank’s February survey said stocks are seeing a bear market rally — signaling they expect them to return to new lows. That’s even as the share of investors expecting a global recession fell to 24%, down from a peak of 77% in November. Pessimism around economic growth is at its lowest in a year, while 83% of fund managers see inflation easing further over the next 12 months, the survey showed.
Palantir Technologies Inc. rallied in premarket trading, after the data analysis company said it expects 2023 to be its first-ever profitable year. Avis Budget Group Inc. rose after the vehicle rental company’s earnings exceeded analyst estimates.
In Europe, gains telecommunications and travel and leisure shares helped push the Stoxx 600 index higher. Vodafone Group Plc shares rose after Liberty Global Plc said it had acquired a stake in the rival British telecom group. TUI AG climbed after the world’s biggest tour operator said summer bookings are running ahead of pre-pandemic levels.
The yen rose following the formal nomination of Kazuo Ueda as the next Bank of Japan governor. Traders have recently increased bets that the BOJ’s yield-curve control and negative-rate policies may be abolished soon under Ueda’s leadership.
The pound climbed after figures showed UK wages rose quicker than expected at the end of 2022, heaping pressure on the Bank of England to deliver another interest-rate increase next month.
Elsewhere in markets, oil prices, a key inflation component, fell after a report that the Biden administration plans to sell more crude oil from the Strategic Petroleum Reserve. Gold rose.
Key events:
- US CPI, New York Fed President John Williams gives the keynote speech at New York Bankers Association event Tuesday
- US retail sales, UK CPI Wednesday
- US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday
- France CPI, Russia GDP Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 8:42 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 rose 0.3% to the highest in about a year
- The MSCI World index rose 0.8%, more than any closing gain since Feb. 7
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%, more than any closing loss since Feb. 7
- The euro rose 0.4% to $1.0768
- The British pound rose 0.6% to $1.2212
- The Japanese yen rose 0.1% to 132.25 per dollar
Cryptocurrencies
- Bitcoin rose 0.4% to $21,721.43
- Ether rose 1.6% to $1,509.96
Bonds
- The yield on 10-year Treasuries was little changed at 3.69%
- Germany’s 10-year yield advanced three basis points to 2.40%
- Britain’s 10-year yield advanced five basis points to 3.45%
Commodities
- West Texas Intermediate crude fell 2% to $78.52 a barrel
- Gold futures rose 0.4% to $1,870.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sujata Rao.
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