US equity futures ticked higher with European stocks as investors awaited US inflation data that may shed light on the Federal Reserve’s next policy move.
(Bloomberg) — US equity futures ticked higher with European stocks as investors awaited US inflation data that may shed light on the Federal Reserve’s next policy move.
Contracts on the S&P 500 added about 0.2% in muted trading before the report that could stoke fresh volatility. Treasury two-year yields rose, holding above 4%, while the dollar was broadly lower.
US headline inflation is expected to slow, with the core reading forecast to ease both on a monthly and yearly basis, supporting market expectations that the Fed will deliver one more rate hike before a pause and pivot to easier policy in the second half of the year.
For Fed officials juggling the need to curb rampant inflation and stabilize wobbly banks, it’s a delicate balancing act.
“Markets have recently taken the view that the Fed needs to ensure stability in the financial system. That means easing back on rate hikes which could topple the economy,” said Russ Mould, investment director at AJ Bell. “However, the reason why rates have been going up so fast over the past 12 months is down to rising inflation, so today’s update will still matter to the Fed.”
Messages from Fed officials themselves have been mixed. On Tuesday Chicago Fed President Austan Goolsbee argued the central bank should exercise “prudence and patience,” while New York Fed President John Williams said officials have more work to do to tackle inflation.
Swap contracts are pricing in about three-in-four odds of another quarter-point Fed hike next month. Traders predict US rates will peak around 5%, with policymakers then cutting by at least 50 basis points by year-end.
Read more: US PREVIEW: Soft March CPI Print to Fuel Fed Rate-Cut Bets
The dollar weakened against most of its Group-of-10 peers, while the euro advanced for a second day. The British pound was the only major currency to fall versus the greenback, extending its decline into a fifth day.
Elsewhere, Bitcoin hovered around $30,000 hitting its highest level in 10 months on Tuesday. Oil steadied as traders tracked supply constraints and gold edged higher.
The Stoxx Europe 600 Index rose 0.3%, led by media and utilities shares.
In US premarket trading, Bed Bath & Beyond shares climbed as much as 5.2% on the retailer’s move to sell shares to shore up cash.
Key events this week:
- Canada rate decision, Wednesday
- US FOMC minutes, CPI, Wednesday
- Richmond Fed’s Thomas Barkin speaks, Wednesday
- China trade, Thursday
- US PPI, initial jobless claim, Thursday
- US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
- Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 6:44 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0928
- The British pound was little changed at $1.2417
- The Japanese yen was little changed at 133.66 per dollar
Cryptocurrencies
- Bitcoin fell 0.5% to $30,029.43
- Ether fell 1.1% to $1,873.56
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.45%
- Germany’s 10-year yield advanced two basis points to 2.33%
- Britain’s 10-year yield was little changed at 3.54%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures rose 0.2% to $2,023.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar.
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