European stocks posted a modest advance and Wall Street equity futures were little changed in the build up to key US inflation data after a drop in wage-growth expectations eased some of the concern over rising prices. The yen rose following the formal nomination of Kazuo Ueda as the next Bank of Japan governor.
(Bloomberg) — European stocks posted a modest advance and Wall Street equity futures were little changed in the build up to key US inflation data after a drop in wage-growth expectations eased some of the concern over rising prices. The yen rose following the formal nomination of Kazuo Ueda as the next Bank of Japan governor.
Gains in European telecom and travel and leisure shares helped push the Stoxx 600 index 0.3% higher. TUI AG climbed after the world’s biggest tour operator said summer bookings are running ahead of pre-pandemic levels.
Futures for the S&P 500 and tech-heavy Nasdaq 100 steadied after the underlying indexes added more than 1% on Monday, when a survey showed Americans drastically reduced their expectations for household income growth amid tighter monetary policy. A gauge Asian stocks was on course to snap a two-day losing streak.
The yen strengthened against most Group-of-10 currencies after the government made the BOJ announcement. 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 possibility of a prolonged hiking cycle in Japan will be the swing factor for the market, according to Morgan Stanley strategists John Kalamaras and Wanting Low. “To the extent a BOJ hiking cycle does not materialize, that should help cement JPY’s status as a ‘funding currency’,” they wrote in a note. “We think more conviction is needed though that BOJ’s reaction function will not be altered and hence stay neutral in the meantime.”
A gauge of greenback strength was slightly lower and 10-year US Treasury yields slipped by two basis points. The pound climbed by as much as 0.3% 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.
US inflation probably accelerated in January to 0.5% from December’s 0.1%, while slowing year-on-year to 6.2% from 6.5%, according to estimates compiled by Bloomberg.
Figures of 6.2% and 0.5% or lower would likely see US equities extend their January rally and break recent highs, Tony Sycamore, a market analyst at IG Australia Pty, wrote in a note. A reading of 6.5% or higher year-on-year would see stocks slump and the dollar rip higher, according to Sycamore.
Still, JPMorgan Chase & Co.’s Marko Kolanovic said that investors should be in bonds since “a recession is currently not priced into equity markets.” Morgan Stanley’s Michael Wilson argued that US stocks are ripe for a selloff after prematurely pricing in a pause in Fed rate hikes.
Oil prices, a key inflation component, fell on a report that the Biden administration plans to sell more crude oil from the Strategic Petroleum Reserve. Gold rose.
Key events:
- US CPI, UK jobless claims, Eurozone GDP, 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
- The Stoxx Europe 600 rose 0.3% as of 8:16 a.m. London time
- S&P 500 futures fell 0.1%
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average fell 0.1%
- The MSCI Asia Pacific Index rose 0.6%
- The MSCI Emerging Markets Index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.0736
- The Japanese yen rose 0.3% to 131.98 per dollar
- The offshore yuan was little changed at 6.8237 per dollar
- The British pound rose 0.1% to $1.2154
Cryptocurrencies
- Bitcoin rose 0.5% to $21,741.53
- Ether rose 1.1% to $1,502.17
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.68%
- Germany’s 10-year yield declined four basis points to 2.32%
- Britain’s 10-year yield declined one basis point to 3.39%
Commodities
- Brent crude fell 0.3% to $86.31 a barrel
- Spot gold rose 0.4% to $1,860.89 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee.
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