(Bloomberg) — Treasury yields and the dollar fell, while U.S. stock futures saw slight moves ahead of a key inflation report.
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Stock traders were hesitant to make big bets amid a flurry of economic data and interest rate decisions this week, with contracts on the S&P 500 and Nasdaq 100 moving in tight ranges. Oracle Corp. fell as much as 9.2% in premarket trading after the software company's second-quarter revenue was disappointing amid slowing momentum in cloud sales.
Tuesday's consumer price index will give Wall Street a sense of whether the disinflationary trend will continue, a day before the Federal Reserve's final scheduled decision of 2023. The U.S. central bank is widely expected to keep interest rates on hold, with most Markets are focusing on whether it will try to dampen expectations of monetary easing following investors' aggressive, dovish repricing.
“Central banks will certainly reinforce the message this week that they remain reliant on data and that they need more confirmation that inflation and core inflation will continue to slow,” said Georgios Leontaris, chief investment officer for Switzerland and EMEA at HSBC Global Private Banking and Wealth. “It is becoming increasingly difficult to convince the markets – and central banks know this – so they will try to maintain this mode of data dependence in the future.”
An indicator of the dollar's strength fell 0.3%. Treasury bonds rose along the curve, with 10-year yields falling four basis points to 4.19%.
European stocks held steady while France's CAC 40 index traded within sight of a record close, reflecting broad optimism that central bank policy easing is imminent. Beata Manthey, a strategist at Citigroup Inc., said the Stoxx 600 benchmark will rise to an all-time high of 510 points by the end of 2024, supported by peak interest rates and as companies in the region avoid an earnings recession.
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In the United Kingdom, government bonds rallied and the pound underperformed after figures showed wage growth slowed at the fastest pace in nearly two years, another sign that the labor market is cooling in response to a weakening economy. The Bank of England decides on interest rates on Thursday. Monetary policy announcements from the European Central Bank as well as Switzerland and Norway are also due on this day.
The U.S. consumer price index is forecast to fall to 3.1% in November, the lowest reading since the June figure released in July, which coincided with this year's low point for the dollar. Core inflation is expected to cool to just under 3% in the first half of next year, according to Bloomberg Economics. Such a scenario would help encourage the Fed to loosen monetary policy.
“If inflation today is in line with market expectations and you annualize the last six months, we can talk about core inflation of under 3%,” HSBC’s Leontaris said. “It will show that peak inflation pressures are behind us.”
Meanwhile, the yen rebounded on Monday from its sharpest fall in more than a month, sparked by a report that Bank of Japan officials see little reason to rush to scrap negative interest rates this month. The cut-off price for selling five-year Japanese government bonds was higher than expected, indicating robust demand as speculation over a possible exit by the BOJ from its negative interest rate regime faded.
Elsewhere, oil prices held steady as an attack on a tanker in the Red Sea briefly raised fears of geopolitical risks in a market otherwise dominated by concerns about oversupply. Gold rose slightly and Bitcoin rose after posting its biggest decline in nearly four months.
Important events this week:
US CPI, Tuesday
Eurozone industrial production, Wednesday
US PPI, Wednesday
Federal Reserve policy meeting and press conference with Chairman Jerome Powell, Wednesday
European Central Bank policy meeting, followed by a press conference with ECB President Christine Lagarde, Thursday
Bank of England policy meeting, Thursday
Policy meeting of the Swiss National Bank, Thursday
US initial jobless claims, retail sales, business inventories, Thursday
China 1-year MLF rate and volume, property prices, retail sales, industrial production, unemployment rate, Friday
Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday
US industrial production, empire manufacturing, cross-border investment, Friday
Some of the key moves in the markets:
Shares
S&P 500 futures were little changed at 6:21 a.m. New York time
Nasdaq 100 futures rose 0.1%
Futures on the Dow Jones Industrial Average rose 0.1%
The Stoxx Europe 600 has hardly been changed
The MSCI World Index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 0.3% to $1.0798
The British pound rose 0.1% to $1.2573
The Japanese yen rose 0.6% to 145.23 per dollar
Cryptocurrencies
Bitcoin rose 1.4% to $41,764.71
Ether rose 0.2% to $2,221.79
Tie up
The 10-year Treasury yield fell four basis points to 4.19%
The yield on 10-year German government bonds fell five basis points to 2.22%
The 10-year UK government bond yield fell 12 basis points to 3.96%
raw materials
West Texas Intermediate crude fell 0.1% to $71.23 a barrel
Spot gold rose 0.2% to $1,986.54 an ounce
This story was produced with support from Bloomberg Automation.
– With assistance from Winnie Hsu and Lynn Thomasson.
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