Stocks, US Futures Steady With Inflation in Focus: Markets Wrap

(Bloomberg) — European stocks and Wall Street equity futures were steady with traders preparing for a key reading of US consumer prices as they assess the outlook for central bank policy.

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Energy and mining stocks were the biggest gainers in a Stoxx Europe 600 index that was flat overall. Among individual moves, Direct Line Insurance Group Plc plunged almost 30% after saying it no longer expects to pay a final dividend. S&P 500 contracts were little changed after the underlying index moved back above its key 3,900 mark in New York on Tuesday. A gauge of Asian equities climbed with sentiment in the region supported by China’s reopening from Covid curbs.

Treasury yields trimmed their advance from the previous session, with the rate on 10-year debt slipping to just below 3.6% as investors remained focused on the price outlook for the US. A gauge of dollar strength held within sight of a seven-month low.

Federal Reserve Chair Jerome Powell in remarks Tuesday refrained from commenting on the outlook for monetary policy as traders await Thursday’s inflation data for any signs of cooling. Such a scenario could help build the case to slow the pace of rate hikes, even as some officials say it’s too early to declare victory over inflation.

“We do expect an inflection in central bank policy later on this year,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “More risk-tolerant investors can look to anticipate this turn by phasing into markets, seeking early winners from a global improvement in sentiment, and identifying beneficiaries from China’s reopening. However, we don’t believe we have yet reached the inflection point in policy or economic growth, and as we enter 2023 we continue to favor a defensive tilt when adding exposure in both equity and fixed-income markets.”

While Powell didn’t directly comment on the Fed’s next steps at a forum in Stockholm, he did say that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise rates to slow the economy.”

Fed Governor Michelle Bowman said the central bank has more work to do to curb inflation, noting that further tightening is needed.

Meanwhile in Asian markets, much focus is on China and its reopening from Covid restrictions. The MSCI Asia Pacific Index rose, adding to Monday’s move, when it entered a bull market amid hopes for economic growth and weakness in the dollar.

“The Chinese reopening today makes China kind of a unique situation in the sense that we had two years of subdued growth due to Covid and now everything is reopening very fast,” said Hugues Rialan, Asia chief investment officer at Pictet Wealth Management. Chinese equities are “fairly cheap” and should benefit from a rebound and repricing this year, according to Rialan.

Optimism over demand from China was also evident in the iron ore market, with the steel-making ingredient rallying above $120 a ton in Singapore. Copper extended gains to a fifth day, rising toward $9,000 a ton as investors bet upcoming US data will show further softening of inflation.

Elsewhere in markets, oil fell after an industry report showed a large build in US crude stockpiles amid a downbeat outlook for monetary policy.

Key events this week:

  • ECB Governing Council members speak at Euromoney conference in Vienna, Wednesday

  • US CPI, initial jobless claims, Thursday

  • St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday

  • Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday

  • China trade, Friday

  • US University of Michigan consumer sentiment, Friday

  • Citigroup, JPMorgan, Wells Fargo report earnings, Friday

This week’s MLIVE Pulse Survey:

Some of the main moves in markets:


  • The Stoxx Europe 600 was little changed as of 8:28 a.m. London time

  • S&P 500 futures were little changed

  • Nasdaq 100 futures fell 0.3%

  • Futures on the Dow Jones Industrial Average were little changed

  • The MSCI Asia Pacific Index rose 0.4%

  • The MSCI Emerging Markets Index rose 0.2%


  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0739

  • The Japanese yen fell 0.3% to 132.65 per dollar

  • The offshore yuan was little changed at 6.7845 per dollar

  • The British pound was little changed at $1.2147


  • Bitcoin fell 0.3% to $17,422.07

  • Ether fell 0.5% to $1,332.07


  • The yield on 10-year Treasuries declined four basis points to 3.58%

  • Germany’s 10-year yield declined two basis points to 2.29%

  • Britain’s 10-year yield declined six basis points to 3.50%


  • Brent crude fell 0.1% to $79.99 a barrel

  • Spot gold rose 0.3% to $1,882.54 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Sofia Horta e Costa and Michael Msika.

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