(Bloomberg) — U.S. futures steadied as traders braced for the Federal Reserve to accelerate its removal of monetary stimulus. Treasury yields and the dollar were little changed.
Contracts on the Nasdaq 100 and S&P 500 were little changed, while shares in U.S.-listed Chinese firms retreated in premarket trading after the Biden administration was said to be considering tougher sanctions.
Europe’s Stoxx 600 Index gained after five days of losses, while MSCI Inc.’s Asia-Pacific share gauge slipped for a fourth session, as a range of Chinese data suggested slowing growth amid a deepening property market slump and Covid disruptions.
Traders are looking to a wave of central bank decisions for clarity on the timing of a pullback, with the Fed decision due later on Wednesday, followed by the Bank of England and European Central Bank Thursday. The Fed is set to unveil a quicker tapering of bond purchases, paving the way for the first interest-rate increases since 2018 as it pivots to restraining the hottest inflation in almost 40 years.
The mix of intense price pressures — U.S. producer-price inflation hit a record of almost 10%, while U.K. inflation surged to its highest level in more than a decade — diminishing central bank support and economic uncertainty around the omicron virus variant is testing markets.
The pound ticked up and money markets boosted bets on BOE rate hikes after data showed U.K. inflation topped 5% in November. With new government restrictions adding to economic uncertainty, investors and economists still expect the Monetary Policy Committee to delay any move until February.
Meanwhile, the ECB’s new projections show inflation below the 2% target in both 2023 and 2024, according to officials familiar with the matter, giving President Christine Lagarde ammunition to argue against a swift increase in interest rates.
“Even if other central banks opt for less hawkish communication this week, the Fed’s hawkish shift today will make it easier for its peers to follow suit,” ING Groep NV analysts led by Padhraic Garvey wrote in a note to investors. “The trend is resolutely towards higher rates globally.”
Oil fell for a third day as further restrictions were imposed to counter the spread of omicron, while the outlook for demand in China dimmed and the International Energy Agency said the global market had already returned to surplus. The surge in European natural gas eased on signs of higher supply, providing some respite from a rally that sent prices surging more than 20% earlier this week.
Geopolitical tensions also continue to bubble. Leading nations of the European Union are resisting a push to quickly draw up specific sanctions and other punishments to impose on Russia if it invades Ukraine, even as the Kremlin shows no sign of backing off a massive troop buildup near its neighbor.
Among individual movers in Europe, DCC Technology shares rose as much as 6.5% after the firm completed the acquisition of Almo Corporation. Cineworld Group Plc shares plunged after a Canadian court ordered it to pay C$1.24 billion ($965 million) in damages to Canada’s Cineplex Inc., after the British chain walked away from a takeover because of the coronavirus outbreak.
On the virus front, the omicron variant will likely be dominant in Europe by mid-January, European Commission President Ursula von der Leyen told the European Parliament on Wednesday, adding that the case numbers appear to be doubling every two or three days.
Initial lab findings showed the vaccine made by Sinovac Biotech Ltd., one of the most widely used in the world, doesn’t provide sufficient antibodies in two doses to neutralize omicron and boosters will likely be needed to improve protection.
Meanwhile, a bill to raise the U.S. debt ceiling by $2.5 trillion headed to President Joe Biden for his signature after being cleared by lawmakers.
Here are some key events this week:
- Fed rate decision, Wednesday.
- U.S. business inventories, retail sales, empire manufacturing, Wednesday.
- BOE rate decision, Thursday.
- ECB rate decision, Thursday.
- U.S. housing starts, initial jobless claims, industrial production, Thursday.
- BOJ monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 8:26 a.m. New York time
- Futures on the Nasdaq 100 were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1260
- The British pound rose 0.1% to $1.3249
- The Japanese yen fell 0.2% to 113.89 per dollar
Bonds
- The yield on 10-year Treasuries was little changed at 1.45%
- Germany’s 10-year yield advanced one basis point to -0.36%
- Britain’s 10-year yield advanced three basis points to 0.76%
Commodities
- West Texas Intermediate crude fell 1.5% to $69.67 a barrel
- Gold futures fell 0.1% to $1,770.40 an ounce
