US equity index futures rose on Thursday, ahead of key US inflation data that could determine how much further the Federal Reserve’s policy-tightening cycle will run.
(Bloomberg) — US equity index futures rose on Thursday, ahead of key US inflation data that could determine how much further the Federal Reserve’s policy-tightening cycle will run.
Futures contracts on the S&P 500 were up 0.5% as of 5:20 a.m.
in New York, while those on the Nasdaq 100 gained 0.3%. The benchmark index had tumbled to its lowest since November 2020 yesterday, as concerns mounted about the impact of hawkish Fed policy, especially on rate-sensitive sectors such as semiconductors.
Europe’s Stoxx 600 gauge reversed an earlier loss to rise 0.2, while on currency markets, the dollar slipped.
Upcoming monthly consumer-price figures may determine if the Federal Reserve delivers a fourth-straight outsized hike in interest rates.
Thursday’s data is expected to show a slight deceleration to 8.1% annually but all eyes are on the ‘core’ reading that excludes food and energy. This is seen rising 6.5% from a year earlier, matching the rate seen in March that was the highest since 1982.
Any sign that price pressures remain elevated may send markets into sell mode, as on Wednesday, when an above-forecast producer prices reading erased a tentative stock rally.
It would also boost Treasury yields and the dollar, potentially adding to its 15% year-to-date gain.
However investors note the Fed is already more or less priced to raise rates by about 75 basis points next month and most markets have fallen sharply in recent weeks.
“Given the negative bond and equity moves over the last month, the potential for reversals of all of these moves on a soft CPI is significant,” Adam Cole, chief currency strategist at RBC Europe in London, wrote in a research note.
The aggressive policy-tightening and expectations of more to come have sent the link between the S&P 500 and Citigroup Inc.’s widely followed surprise index for the US economy to the most negative since 2015.
Read more: Inflation Data Calling the Shots as Market Correlations Snowball
Chip stocks were under pressure after chip-gear maker Applied Materials Inc.
slashed fourth-quarter earnings forecast, citing the Biden administration’s new chip export control rules, while Taiwan Semiconductor Manufacturing Co. slashed its 2022 capital spending target.
The dollar eased against most other currencies and US 10-year Treasury yields held off multi-year highs hit recently.
“It’s all about the core CPI.
If that comes in below expectations, you can anticipate a pretty aggressive dollar selloff as we can then start to price in a peak in the Fed Funds Rate,” said Peter Kinsella, head of currency strategy at asset manager UBP.
In UK markets, the pound inched up and long-dated bonds rallied sharply as a recent selloff lured in buyers.
Investors remain focused on whether the Bank of England will extend its Oct. 14 deadline to end an emergency bond-buying program it launched to soothe markets. It has so far declined to do so.
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.
- 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
- The Stoxx Europe 600 fell 0.4% as of 8:38 a.m.
London time
- Futures on the S&P 500 rose 0.1%
- Futures on the Nasdaq 100 were little changed
- Futures on the Dow Jones Industrial Average rose 0.1%
- The MSCI Asia Pacific Index fell 0.9%
- The MSCI Emerging Markets Index fell 1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.1% to $0.9690
- The Japanese yen was little changed at 146.82 per dollar
- The offshore yuan fell 0.3% to 7.1979 per dollar
- The British pound fell 0.2% to $1.1076
Cryptocurrencies
- Bitcoin fell 0.9% to $18,988.26
- Ether fell 1.8% to $1,275.32
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.93%
- Germany’s 10-year yield was little changed at 2.32%
- Britain’s 10-year yield was little changed at 4.43%
Commodities
- Brent crude rose 0.6% to $93.03 a barrel
- Spot gold fell 0.3% to $1,668.27 an ounce
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