Stocks advance in countdown to US inflation report: Markets Wrap

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(Bloomberg) — Global stocks rose as investors awaited US inflation data that will help clarify the path for Federal Reserve policy.

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Europe’s Stoxx 600 index advanced 0.6%, while US equity futures showed the S&P 500 and Nasdaq 100 indexes set to add to Wednesday’s gains. A gauge of Asian stocks rallied as Japanese equities hit a fresh three-decade high. Treasuries rose, while the dollar weakened against all its Group-of-10 peers.

In individual stock moves, Tesco Plc climbed after Britain’s biggest retailer raised its profit guidance. Marks & Spencer Group Plc dropped after its third-quarter sales report.

The US inflation report is top of mind for traders Thursday. Confirmation of easing price pressures will support optimism around expectations of Fed rate cuts, but a hotter-than expected reading could spur volatility. Economists tracked by Bloomberg expect year-over-year core inflation to fall to 3.8% in the December data from 4% in the prior month.

Benchmark Japanese indexes notched fresh three-decade highs, thanks in part to the yen’s recent weakness. Strategists also said a newly introduced tax-free retirement savings program may help attract more domestic inflows to the market.

“The recent rally shows that overall, both domestic individual investors and foreign investors have been forced to change their attitude toward Japanese stocks to a more positive one,” said Ikuo Mitsui, fund manager at Aizawa Securities Co. “There is also a sense that investors who were late to the market are buying to follow the rise in the index.”

Investors are gearing up for a bout of turbulence in Treasuries when the US consumer price data are published later. Bond traders have trimmed bets on gains for Treasuries this month, and the swaps market shows a lower chance of expected Fed cuts by March relative to pricing late last year.

New York Federal Reserve President John Williams. (Rob Kim/Getty Images) (Rob Kim via Getty Images)

Fed Bank of New York President John Williams said Fed officials need to see more signs of cooling in the economy before reducing rates, but noted current policy levels are adequate to bring inflation back to the central bank’s target. The tone of comments differed from those he made on Dec. 15, when he said the near-term question was whether policy was “sufficiently restrictive” to ensure inflation comes back to 2%. At the time, he also added that officials “aren’t really talking about rate cuts.”

“There were some pushback against overly dovish rate expectations from New York Fed President John Williams,” Jun Rong Yeap, market strategist at IG Asia, wrote in a note. Yeap sees markets remaining focused on economic data “to justify rate views as compared to Fed’s verbal cues.”

At the same time, JPMorgan Asset Management says the Fed may end up cutting interest rates more than it’s currently signaling as the US economy slows, driving a rally in shorter-maturity Treasuries.

Bitcoin erased all its gains after rising as much as 3.8% to trade above $47,700 early Thursday. The US Securities and Exchange Commission approved ETFs that directly invest in Bitcoin. Ether held onto gains, and hovered near the highest level since May 2022.

Oil added to gains as tensions in the Middle East persisted, while gold also advanced.

Key events this week:

  • US CPI, initial jobless claims, Thursday

  • China CPI, PPI, trade, Friday

  • UK industrial production, Friday

  • US PPI, Friday

  • Some of the biggest US banks report fourth-quarter results, Friday

  • Minneapolis Fed President Neel Kashkari speaks, Friday

  • ECB chief economist Philip Lane speaks, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.6% as of 8:17 a.m. London time

  • S&P 500 futures rose 0.3%

  • Nasdaq 100 futures rose 0.5%

  • Futures on the Dow Jones Industrial Average rose 0.2%

  • The MSCI Asia Pacific Index rose 1.1%

  • The MSCI Emerging Markets Index rose 0.6%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro was little changed at $1.0977

  • The Japanese yen rose 0.2% to 145.41 per dollar

  • The offshore yuan rose 0.2% to 7.1687 per dollar

  • The British pound rose 0.2% to $1.2764

Cryptocurrencies

  • Bitcoin rose 0.5% to $46,187.69

  • Ether rose 2.6% to $2,593.58

Bonds

  • The yield on 10-year Treasuries declined four basis points to 3.99%

  • Germany’s 10-year yield advanced two basis points to 2.23%

  • Britain’s 10-year yield declined three basis points to 3.79%

Commodities

  • Brent crude rose 0.8% to $77.42 a barrel

  • Spot gold rose 0.4% to $2,032.41 an ounce

This story was produced with the assistance of Bloomberg Automation.

—With assistance from Winnie Hsu and Richard Henderson.

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©2024 Bloomberg L.P.

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