US Futures, Stocks Climb Before Key Inflation Data: Markets Wrap

(Bloomberg) — Wall Street equity futures edged higher and European stocks advanced as investors prepared for the release of US inflation numbers later Tuesday that will be crucial in assessing the Federal Reserve’s stance on the pace of further rate hikes.

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Contracts for the S&P 500 rose 0.2% and those on the tech-heavy Nasdaq 100 climbed 0.3. Palantir Technologies Inc. rallied in premarket trading, after the data analysis company said it expects 2023 to be its first-ever profitable year. Avis Budget Group Inc. rose after the vehicle rental company’s earnings exceeded analyst estimates.

Gains in European telecommunications and travel and leisure shares helped push the Stoxx 600 index higher. Vodafone Group Plc shares rose after Liberty Global Plc said it had acquired a stake in the rival British telecom group. TUI AG climbed after the world’s biggest tour operator said summer bookings are running ahead of pre-pandemic levels.

US inflation probably accelerated in January to 0.5% from December’s 0.1%, while slowing year-on-year to 6.2% from 6.5%, according to estimates compiled by Bloomberg. After a rally of almost 8% in the S&P 500 this year, Tuesday’s print will show whether investor optimism over an easing in the path of Fed rate hikes has been justified, with a hotter-than-expected reading likely to weigh on markets.

“The Fed is as uncertain on the inflation outcome as we are,” said Adam Cole, head of currency strategy at RBC Europe in London. That means the focus on “the incremental news each month on CPI is incredibly high,” he said.

The yen rose following the formal nomination of Kazuo Ueda as the next Bank of Japan governor. Traders have recently increased bets that the BOJ’s yield-curve control and negative-rate policies may be abolished soon under Ueda’s leadership.

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A gauge of greenback strength slipped, while 10-year US Treasury yields were little changed. The pound climbed after figures showed UK wages rose quicker than expected at the end of 2022, heaping pressure on the Bank of England to deliver another interest-rate increase next month.

Meanwhile, Bank of America Corp.’s latest global fund manager survey suggests that while equity markets are on a relentless march higher amid optimism around stronger economic growth and cooling inflation, most investors aren’t convinced the gains will last.

About 66% of participants in the bank’s February survey said stocks are seeing a bear market rally — signaling they expect them to return to new lows. That’s even as the share of investors expecting a global recession fell to 24%, down from a peak of 77% in November. Pessimism around economic growth is at its lowest in a year, while 83% of fund managers see inflation easing further over the next 12 months, the survey showed.

“Whether bond yields retest the highs and whether we get another phase of the equity selloff — it’s all the same trade: it’s whether or not inflation has peaked,” RBC’s Cole said.

Elsewhere in markets, oil prices, a key inflation component, fell after a report that the Biden administration plans to sell more crude oil from the Strategic Petroleum Reserve. Gold rose.

Key events:

• US CPI, New York Fed President John Williams gives the keynote speech at New York Bankers Association event Tuesday

• US retail sales, UK CPI Wednesday

• US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday

• France CPI, Russia GDP Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 5:48 a.m. New York time

• Nasdaq 100 futures rose 0.4%

• Futures on the Dow Jones Industrial Average were little changed

• The Stoxx Europe 600 rose 0.5%

• The MSCI World index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro rose 0.3% to $1.0753

• The British pound rose 0.4% to $1.2193

• The Japanese yen rose 0.1% to 132.27 per dollar

Cryptocurrencies

• Bitcoin rose 0.9% to $21,826.49

• Ether rose 1.7% to $1,511.01

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.69%

• Germany’s 10-year yield declined one basis point to 2.36%

• Britain’s 10-year yield advanced one basis point to 3.41%

Commodities

• West Texas Intermediate crude fell 1.5% to $78.96 a barrel

• Gold futures rose 0.4% to $1,871.10 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Tassia Sipahutar and Sujata Rao.

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