Wall Street futures declined while European stocks steadied as investors assessed how inflation data from the US and the UK will affect the outlook for interest rates, and as they digested results from major companies.
(Bloomberg) — Wall Street futures declined while European stocks steadied as investors assessed how inflation data from the US and the UK will affect the outlook for interest rates, and as they digested results from major companies.
Contracts for the S&P 500 retreated, after the underlying index ended flat on Tuesday. Nasdaq 100 futures also slid after the gauge, which is more sensitive to higher interest rates, rose 0.7%. Airbnb Inc. rallied in premarket trading after the home-sharing company gave a revenue outlook that beat analysts’ estimates.
Europe’s Stoxx 600 erased a drop, supported by gains in consumer stocks. Barclays Plc slumped as much as 10%, the most since April 2020, after the bank’s earnings missed estimates.
Investors are evaluating US CPI data that showed prices rose more than forecast, and subsequent comments from Federal Reserve officials. UK inflation also remains stubbornly high, in double digits and five times above the Bank of England’s target, according to data out Wednesday. Still, the pound weakened as CPI fell more than expected in January. Traders trimmed their bets on further rate hikes and gilts rallied.
The dollar strengthened against its Group-of-10 peers. The rate-sensitive two-year Treasury yield held near the highest level since November after jumping 10 basis points Tuesday. The 10-year Treasury benchmark was steady after falling four basis points in the prior session.
“We are in a trading market with a number of cross currents,” said Frederique Carrier, head of investment strategy at RBC Wealth Management. “People are trying to gauge the peak for interest rates but tightening monetary policy is likely to continue, while later in the year there is the likelihood of recession that could put a downer on prices.”
Federal Reserve Bank of Philadelphia President Patrick Harker said the Fed was nearing the point where rates were restrictive enough. “In my view, we are not done yet,” he said. “But we are likely close.”
Harker’s Richmond Fed counterpart Thomas Barkin told Bloomberg TV that the central bank might “have to do more”to fight inflation and Dallas Fed President Lorie Logan said rate increases could last “for a longer period than previously anticipated.”
“Inflation is still falling, but it’s not falling as quickly as we hoped,” Benjamin Kirby, co-head of investments for Thornburg Investment Management, said in an interview with Bloomberg TV. “The overall narrative is pretty much intact,” he added. “The Fed is nearing its terminal rate.”
Among other European stocks in focus Wednesday, Deutsche Lufthansa AG fell after the airline grounded all flights, citing issues with its computer systems. The fault was likely caused by a cut Deutsche Telekom broadband cable, according to a person familiar with the matter. Kering SA soared as investors looked past a fourth-quarter sales miss to focus on how the Gucci owner may benefit from China’s reopening.
Elsewhere in equities, Turkey’s Borsa Istanbul 100 Index rose more than 9% as trading resumed after a week-long suspension following the devastating earthquakes that struck the country’s southeast, with authorities throwing their full weight behind investors to avoid a repeat of last week’s rout.
Oil fell for a second day after after an industry estimate pointed to a large build in US inventories and investors assessed the outlook for US monetary policy. The International Energy Agency boosted forecasts for global oil demand as China reopens its economy following years of anti-Covid lockdowns. Gold dropped.
Key events:
- US retail sales Wednesday
- US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday
- France CPI, Russia GDP Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 6:09 a.m. New York time
- Nasdaq 100 futures fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.2% to $1.0720
- The British pound fell 0.8% to $1.2076
- The Japanese yen fell 0.1% to 133.34 per dollar
Cryptocurrencies
- Bitcoin was little changed at $22,246.49
- Ether was little changed at $1,555.19
Bonds
- The yield on 10-year Treasuries was little changed at 3.74%
- Germany’s 10-year yield declined two basis points to 2.42%
- Britain’s 10-year yield declined 10 basis points to 3.42%
Commodities
- West Texas Intermediate crude fell 0.9% to $78.33 a barrel
- Gold futures fell 1.1% to $1,845.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar, Richard Henderson, Tony Jordan and Sujata Rao.
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