European stocks and US futures struggled for direction amid mixed corporate earnings and as traders parsed the latest data for clues on the outlook for inflation and economic growth.
(Bloomberg) — European stocks and US futures struggled for direction amid mixed corporate earnings and as traders parsed the latest data for clues on the outlook for inflation and economic growth.
The Stoxx Europe 600 index was little changed after purchasing managers’ gauges for the euro area showed resilient service-sector activity, but a further decline in manufacturing orders. Mining stocks lagged as iron ore fell to the lowest since December, with Rio Tinto Plc down more than 3%. SAP AG, Europe’s biggest software company, advanced after forecasting profit ahead of analyst’s estimates. Carmaker Mercedes-Benz AG gained after an earnings beat.
Futures on the S&P 500 and Nasdaq 100 wavered after yesterday’s losses on Wall Street, with investors awaiting PMI data for the world’s biggest economy later Friday.
Treasury yields ticked higher. The dollar advanced against most of its Group-of-10 peers, with a gauge of its strength set for its first weekly gain in six weeks. The yen outperformed as signs of worsening ties between the US and China spurred traders to buy the haven currency before the weekend. A benchmark of Asian stocks declined.
European Central Bank Vice President Luis de Guindos said Friday that underlying inflation in the euro area remains “very sticky.” The ECB is widely expected to increase its deposit rate at its next policy meeting on May 4, with the choice likely to be either a quarter- or half-point step. Meanwhile, Federal Reserve officials backed another rate increase as they monitor economic fallout from bank strains.
“We are in the camp of US recession in the second half, and expect data to weaken going forward,” said Mohit Kumar, a strategist at Jefferies International Ltd.. “Once the last Fed hike is done in May, the market will start to focus on the weak economic data and bad data will become bad news; seasonality starts to turn in May, with May and June poor months for risky-asset performance.”
Recurring claims for US unemployment benefits jumped to the highest level since November 2021, adding to signs the labor market is beginning to cool. Sales of previously-owned homes fell in March by more than economists forecast, underscoring a housing market that’s still on shaky footing despite some signs of stabilizing. US mortgage rates rose for the first time since early March.
The data led traders to pare bets on more Federal Reserve rate hikes. The policy-sensitive two-year Treasury yield dropped two basis points to 4.12% after sliding 10 basis points on Thursday.
Fed Bank of Cleveland President Loretta Mester signaled support for another rate hike to quell inflation while flagging the need to watch recent bank stress that may crimp credit and damp the economy. Her Dallas counterpart Lorie Logan said inflation has been “much too high,” while outlining measures to watch.
US President Joe Biden aims to sign an executive order in the coming weeks that will limit investment in key parts of China’s economy by US businesses, people familiar with the internal deliberations said. The move is another measure in the years-long economic campaign against China.
“It’s just the next step in a long line of such restrictions that adds to underlying tension between the US and China, raises the cost of trade, and moves the world further away from peak globalization,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney.
In other markets, oil steadied after dropping by the most in more than a month on Thursday, wiping out almost all of the gains stemming from OPEC+’s output cut on signs of a global economic slowdown. Gold dipped below $2,000 an ounce.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 9:16 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.8%
- The MSCI Emerging Markets Index fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0964
- The Japanese yen rose 0.2% to 134.02 per dollar
- The offshore yuan fell 0.2% to 6.8962 per dollar
- The British pound fell 0.3% to $1.2406
Cryptocurrencies
- Bitcoin fell 0.2% to $28,139.83
- Ether fell 0.6% to $1,926.9
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.55%
- Germany’s 10-year yield advanced two basis points to 2.47%
- Britain’s 10-year yield was little changed at 3.77%
Commodities
- Brent crude was little changed
- Spot gold fell 0.9% to $1,987.36 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael G. Wilson.
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