US equity futures retreated as a rally in tech stocks lost steam and persistent inflationary pressures cemented expectations for higher rates in the US and Europe. Treasuries advanced.
(Bloomberg) — US equity futures retreated as a rally in tech stocks lost steam and persistent inflationary pressures cemented expectations for higher rates in the US and Europe. Treasuries advanced.
Contracts on the S&P 500 and the Nasdaq 100 slipped as Amazon.com Inc.’s warning after the market close on growth in its key cloud computing business soured the mood. Treasuries recouped some of Thursday’s losses, with the 10-year benchmark yield falling about seven basis points. The policy-sensitive two-year rate remained above 4%.
Markets remain on edge, as data on inflation reinforced expectations of a Federal Reserve interest rate hike next week, and possibly in June.
The personal consumption expenditures price index excluding food and energy, one of the Fed’s preferred inflation gauges, rose 0.3% in March for a second month. Compared with a year ago, the measure was up 4.6%. The overall PCE price index increased 0.1% from the prior month, restrained by a decline in energy costs, Commerce Department data showed Friday.
Read more: US Core PCE Inflation Stays Brisk While Consumer Spending Stalls
“What looks like sticky contemporaneous inflation remains an issue, preventing the market from getting too carried away on the rate-cutting phase to come in subsequent quarters,”’ wrote Padhraic Garvey, head of global debt and rates strategy at ING Financial Markets.
In Europe, an uptick in consumer-price gains points to more rate increases by the European Central Bank, which also meets next week.
Analysts at Berenberg said equities’ strong year-to-date gains had been driven by resilient earnings and receding pessimism on economic growth, but “risks are skewed to the downside over the coming months, with headwinds from tighter policy, margin headwinds and US recession.”
On Thursday, US equities enjoyed the biggest daily gain since January, thanks to solid earnings from technology firms, including Meta Platforms Inc. and Intel Corp. That was before the Amazon warning and disappointing results from Snap Inc. and Pinterest.
Read more: Snap Shares Set for Biggest Drop in Six Months After Sales Fall
The Bank of Japan, by contrast, renewed its commitment to stimulus. It left its short-term policy rate at minus 0.1% in the first meeting under new governor Kazuo Ueda, maintained its 0.5% ceiling for 10-year bond yields and launched a policy review that may take one-and-a-half years.
Japanese stocks surged as much as 1.5% while the yen tumbled 1.6% lower versus the dollar. The greenback gained against a basket of Group-of-10 currencies.
Elsewhere, oil prices headed for a sixth straight monthly decline, weighed down by slowdown concerns in the US and Asia.
Here are some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 8:40 a.m. New York time
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average fell 0.4%
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro fell 0.6% to $1.0965
- The British pound fell 0.3% to $1.2464
- The Japanese yen fell 1.6% to 136.15 per dollar
Cryptocurrencies
- Bitcoin fell 1% to $29,330.67
- Ether fell 0.7% to $1,906.57
Bonds
- The yield on 10-year Treasuries declined seven basis points to 3.45%
- Germany’s 10-year yield declined 12 basis points to 2.34%
- Britain’s 10-year yield declined seven basis points to 3.72%
Commodities
- West Texas Intermediate crude rose 0.8% to $75.38 a barrel
- Gold futures fell 0.5% to $1,988.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
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