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(Bloomberg) — U.S. stock futures edged lower and bonds fell as investors braced for the Federal Reserve’s release of a key inflation measure that will help gauge the future direction of interest rates.
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The S&P 500 and tech-heavy Nasdaq 100 contracts both fell about 0.2%. Snowflake Inc. fell sharply after the cloud software company announced its chief executive officer resigned and released disappointing revenue forecasts. WW International plunged after Oprah Winfrey announced she would resign from the company’s board.
European stock markets were volatile on another busy day on the earnings calendar. Moncler SpA rose after the Italian luxury brand beat profit estimates. Air France-KLM suffered after a loss in the fourth quarter.
U.S. core consumer spending indicators on Thursday validated recent comments from Fed officials indicating they are in no hurry to ease monetary policy, highlighting twists and turns on the path to the central bank’s 2% inflation target There is a high possibility that it will. A better than expected rate cut could undermine expectations for a three-quarter point rate cut by the end of the year.
“The market always has something to look at, and with earnings out of the way and the interest rate outlook priced in, the next trigger is inflation,” said Beata Mansey, equity strategist at Citigroup. . Today’s reputation is good, but when you look at the fundamentals, the earnings show that it’s delivering results. ”
U.S. Treasury yields rose, with the policy-sensitive two-year bond up 5 basis points. Yields also rose in Europe after mixed views on price pressures from France and Spain, with Germany’s inflation set to come. The dollar firmed and the yen rose by the most in more than a week after Bank of Japan board member Hajime Takada suggested calls for an end to the bank’s negative interest rate policy were gaining momentum.
Bitcoin rose further on Wednesday after surging above $60,000 for the first time in more than two years, reflecting new demand from exchange-traded funds (ETFs). The currency amounted to almost $64,000. The all-time high for 2021 is just under $69,000.
Stocks ended the month on a strong note, with the S&P 500 and Nasdaq 100 up more than 4%, as excitement around artificial intelligence sparked record-breaking stock gains on the power of tech on Wall Street. MSCI’s global stock index has risen for four consecutive months, marking its longest winning streak since 2021.
Ulrich Urbahn, head of multi-asset strategy and research at Berenberg, said the end-of-February trades were more likely to reflect month-end revisions than the data, as inflation trends are already priced into the market following consumer trends this month. He expressed the view that the balance is likely to be affected. and producer price reports.
“It makes sense to focus on PCE because ‘that’s what the Fed cares about,'” Urban said. “But most are already baked in the cake. Stocks have significantly outperformed bonds this year, so the market will be hit hard by the rebalancing trend.”
New York Fed President Williams said Wednesday the central bank has a “path forward” in the fight against inflation, while Atlanta Fed President Rafael Bostic called for patience when it comes to adjusting policy.
Traders are currently pricing in about 80 basis points of easing by the end of the year, roughly in line with what officials said was the most likely outcome in December. The Fed’s policy has been to increase rates in 25 basis point increments, which equates to three rate cuts in 2024. To put things into perspective, as of early February, swaps were forecast to be down almost 150 basis points this year.
“FedSpeak and economic data so far this week suggest that central bankers remain reliant on data, leading to increased volatility around key economic release releases and a short-term outlook. Inflation appears to be accelerating again, which could make it more difficult to meet the February 2019 % inflation target,” Kathleen Brooks, research director at XTB, wrote in a note. .
This week’s main events:
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German CPI, Thursday
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US Consumer Income, PCE Deflator, New Unemployment Insurance Claims, Thursday
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Fed’s Austan Goolsby, Raphael Bostic and Loretta Mester speak Thursday
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China official PMI, Caixin manufacturing PMI, Friday
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Eurozone S&P World Manufacturing PMI, CPI, Unemployment Rate, Friday
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BOE Chief Economist Hugh Pill speaks on Friday
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US Construction Spending, ISM Manufacturing, University of Michigan Consumer Sentiment, Friday
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Fed’s Rafael Bostic and Mary Daly speak on Friday
The main movements in the market are:
stock
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As of 6:22 a.m. New York time, S&P 500 futures were down 0.3%.
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Nasdaq 100 futures fell 0.2%
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Dow Jones Industrial Average futures fell 0.3%.
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Stoxx European 600 rose 0.1%
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MSCI World Index little changed
currency
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Bloomberg Dollar Spot Index little changed
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The euro was almost unchanged at $1.0843.
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The British pound was almost unchanged at $1.2663.
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The Japanese yen rose 0.4% to 150.03 yen to the dollar.
cryptocurrency
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Bitcoin rises 3.9% to $62,930.26
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Ether rose 4.9% to $3,486.52
bond
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The 10-year Treasury yield rose 4 basis points to 4.31%.
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Germany’s 10-year bond yield rose 4 basis points to 2.50%.
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The UK 10-year bond yield rose 7 basis points to 4.25%.
merchandise
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West Texas Intermediate crude oil fell 0.2% to $78.39 a barrel.
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Spot gold fell 0.2% to $2,031.03 per ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Chiranjivi Chakraborty.
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