Stocks, US Futures Are Steady as Traders Await CPI: Markets Wrap

(Bloomberg) — US index futures and European equities were steady amid forecasts inflation in the world’s largest economy will post the lowest figure this year, warranting a less hawkish Federal Reserve.

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Contracts on the S&P 500 and Nasdaq 100 rose less than 0.1% after the underlying indexes climbed on Monday by the most in December. The Stoxx 600 gauge was little changed. The dollar weakened for the first time in three days. Treasuries gained, diverging from European bonds that fell. Oil rallied on signs of further easing in China’s Covid rules.

US stocks advanced Monday as traders took comfort from economists’ projection for a 7.3% expansion in the US consumer price index for November. If that expectation comes true, it would be the lowest reading in 11 months and the fifth consecutive drop. While that would still leave inflation much higher than the Fed’s target of 2%, it could justify a slowdown in the pace of monetary tightening, with a projected half-point move on Wednesday. However, it also leaves the bar low for disappointment and a selloff.

“Today’s US CPI data will give us an idea on how the market pricing for the Fed’s terminal rate will clash with the dot plot projections that will come out tomorrow, and that will, in all cases, hammer any potentially optimistic market sentiment,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “Therefore, even if we see a great CPI print and a nice market rally today, it may not extend past the Fed decision on Wednesday.”

The European equity benchmark steadied from Monday’s losses as traders awaited the US release but were also mindful of the European Central Bank’s rate decision due Thursday. The continent’s policymakers are expected to follow the Fed with their own half-point hike. Meanwhile, data showed that UK wages are rising at close to a record pace, maintaining pressure on the Bank of England to keep hiking interest rates despite a worsening economic outlook.

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Treasuries advanced with the 10-year rate shedding 1 basis point. The Bloomberg Dollar Spot Index traded below its 200-day moving average, having fallen below it earlier this month. An Asian equity benchmark rose after Hong Kong’s decision to scrap its three-day Covid monitoring period for arriving travelers.

Crude oil rallied, with West Texas Intermediate futures climbing above $74 a barrel. China’s ambassador to the US said the nation will continue relaxing its curbs and will welcome more international travelers soon.

Investors are also weighing the impact of Japan and the Netherlands agreeing in principle to at least partially join the US in increasing controls over the export to China of advanced machinery to make semiconductors. Trading of Asian semiconductor stocks was mixed on the news.

Key events this week:

• US CPI, Tuesday

• FOMC rate decision and Fed Chair news conference, Wednesday

• China medium-term lending, property investment, retail sales, industrial production, surveyed jobless, Thursday

• ECB rate decision and ECB President Lagarde briefing, Thursday

• Rate decisions for UK BOE, Mexico, Norway, Philippines, Switzerland, Taiwan, Thursday

• US cross-border investment, business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday

• Eurozone S&P Global PMI, CPI, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 8:27 a.m. London time

• Futures on the S&P 500 were little changed

• Futures on the Nasdaq 100 were little changed

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 0.2%

• The MSCI Emerging Markets Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.1% to $1.0549

• The Japanese yen was unchanged at 137.67 per dollar

• The offshore yuan was little changed at 6.9844 per dollar

• The British pound was little changed at $1.2265

Cryptocurrencies

• Bitcoin was little changed at $17,183.63

• Ether fell 0.7% to $1,266.57

Bonds

• The yield on 10-year Treasuries dropped 1 basis pont to 3.60%

• Germany’s 10-year yield advanced five basis points to 1.99%

• Britain’s 10-year yield advanced three basis points to 3.23%

Commodities

• Brent crude rose 1.8% to $79.42 a barrel

• Spot gold rose 0.2% to $1,785.46 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott.

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