US futures pared gains and European stocks extended declines on Wednesday after producer price data fueled Federal Reserve tightening bets. UK markets were roiled once again by policy concerns.
(Bloomberg) — US futures pared gains and European stocks extended declines on Wednesday after producer price data fueled Federal Reserve tightening bets.
UK markets were roiled once again by policy concerns.
The yield on 30-year gilts rose above 5% after the Bank of England confirmed its plan to end emergency bond purchases, but the pound rallied above $1.10.
The BOE also signaled interest rates are likely to rise sharply in November and warned that some UK households may face a strain over debt repayments that’s as great as before the 2008 financial crisis.
“The Bank of England is a test case for how hawkish central banks can be without doing damage to financial stability,” said Michael Metcalfe, global head of macro strategy at State Street Global Markets.
Treasury yields and the dollar were little changed as data showed prices paid to US producers rose in September by more than expected ahead of a key inflation measure due Thursday that’s set to return to a four-decade high.
US investors are also looking to corporate earnings for clues about Federal Reserve policy.
Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation.
“This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”
Among notable premarket moves, Moderna Inc.
rose after Merck & Co. exercised its option to jointly develop and commercialize a cancer vaccine. Major US technology, internet and semiconductor stocks rebounded.
“While futures positioning is now slightly less extreme, it is still a very bearish set up into what is seen as a binary market event tomorrow,” said Carl Dooley, head of EMEA trading at Cowen in London.
That makes it “natural to see some bear covering, with the remaining bulls having another roll of the dice.”
In Europe, Credit Suisse Group AG slumped after a report that US authorities are investigating whether the bank helped clients hide assets.
Elsewhere, crude fluctuated.
OPEC slashed projections for the amount of crude it will need to pump this quarter, while Russia’s President Vladimir Putin said any energy infrastructure in the world is at risk after the explosions on the Nord Stream pipelines.
NATO Secretary General Jens Stoltenberg urged alliance members to step up supplies of air defense systems to Ukraine, condemning Russian strikes.
In China, Shanghai is quietly shutting down schools and a raft of other venues as officials try to rein in a flareup that’s hit the financial hub.
Key events this week:
- Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S.
Bancorp, Wells Fargo & Co.
- FOMC minutes for September meeting, Wednesday
- US PPI, mortgage applications, Wednesday
- OPEC Monthly Oil Market Report, Wednesday
- Fed’s Michelle Bowman and Neel Kashkari speak
- ECB’s Christine Lagarde speaks
- US CPI, initial jobless claims, Thursday
- G-20 finance ministers and central bankers meet, Thursday
- China CPI, PPI, trade, Friday
- US retail sales, business inventories, University of Michigan consumer sentiment, Friday
- BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.4% as of 8:45 a.m.
New York time
- Futures on the Nasdaq 100 rose 0.5%
- Futures on the Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index fell 1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $0.9704
- The British pound rose 0.8% to $1.1052
- The Japanese yen fell 0.6% to 146.73 per dollar
Cryptocurrencies
- Bitcoin rose 0.5% to $19,119.64
- Ether rose 1.4% to $1,299.83
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.96%
- Germany’s 10-year yield advanced nine basis points to 2.39%
- Britain’s 10-year yield advanced 12 basis points to 4.56%
Commodities
- West Texas Intermediate crude fell 0.6% to $88.84 a barrel
- Gold futures fell 0.7% to $1,673.80 an ounce
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