Futures rise, dollar falls ahead of CPI data: Markets fold

(Bloomberg) — U.S. stock index futures rallied ahead of key inflation data due later Tuesday. Bond yields fell and the dollar extended its slide.

S&P 500 and Nasdaq 100 futures rose after the S&P capped its best four-day gain since June on Monday after strong pre-order data for Apple Inc’s iPhone 14 Pro Max. The Bloomberg Dollar Spot index fell for a third day, its biggest losing streak in more than a month, as investors weighed positive signs in the economy against hawkish rhetoric from Federal Reserve policymakers.

Corporate news helped boost the Stoxx Europe 600 index, with UBS Group AG rising after raising its dividend and share buyback target. Retailers and grocers saw off some of their recent rally after Ocado Group Plc said inflation and energy costs would weigh on profits. Most European government bonds fell.

The US inflation report is expected to show that the headline CPI fell in August to 8% annually. That sparked a debate among market participants about the outlook for monetary policy, with some betting the Fed could end its tightening cycle sooner and others warning the central bank will want more evidence of sustained restraint on hikes of prices.

“It is too early to expect the Fed to react to the fact that we are past peak inflation,” Nannette Hechler-Fayd’Herbe, chief investment officer at Credit Suisse International Wealth Management, told Bloomberg TV. “When you look at the S&P 500, we’ve seen very large levels of support from a technical standpoint, so I can very well imagine volatility taking us to those levels once the market finally realizes that the Fed won’t cut rates as early as 2023. »

Read more: Markets look for Soft CPI, but the devil will be in the details

US bond market indicators suggest investors are gaining confidence that this year’s rise in inflationary pressures will be brought under control. The cost of hedging against high inflation has fallen, while so-called inflation-protected Treasury breakeven rates — an indicator of where markets expect inflation to be — have also fallen.

Concerns about a global recession are also easing, with JPMorgan Chase & Co. to say that a soft landing becomes the most likely scenario for the global economy, which will continue to provide a queue for risky assets. Recent data showing easing inflation and wage pressures, rebounding growth and stabilizing consumer confidence suggest the world will avoid recession, a team including Marko Kolanovic and Nikolaos Panigirtzoglou wrote on Monday.

“The fact is that two back-to-back reports showing a sharp slowdown combined with last month’s goldilocks jobs report will be a really encouraging sign and could trigger a broader risk-on recovery in the markets,” said Craig Erlam, senior market analyst at Oanda Europe Ltd. “It may not be enough to tip the Fed’s balance in favor of a more modest 50 basis point rate hike next week, but it may slow the pace of tightening thereafter.”

Among other assets, crude oil extended gains as a weaker dollar offset global demand worries and progress toward an Iran nuclear deal stalled. Bitcoin held above $22,000. The offshore yuan weakened against the dollar even as the People’s Bank of China set its daily benchmark rate for the currency stronger than expected for a 14th day.

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Here are some key events to watch this week:

  • US CPI, Tuesday

  • UK CPI, Wednesday

  • US PPI, Wednesday

  • US Business Inventories, Imperial Manufacturing, Retail Sales, Initial Jobless Claims, Industrial Production, Thursday

  • China home sales, retail sales, industrial production, fixed assets, unemployment rate in survey, Friday

  • Eurozone CPI, Friday

  • US University of Michigan Consumer Sentiment, Friday

Some of the main movements in the markets:

inventories

  • The Stoxx Europe 600 was up 0.3% at 9:01 a.m. London time

  • S&P 500 futures rose 0.5%

  • Nasdaq 100 futures rose 0.5%

  • Dow Jones Industrial Average futures rose 0.4%

  • MSCI Asia Pacific rose 0.6%

  • MSCI Emerging Markets rose 0.6%

currency

  • The Bloomberg Dollar Spot Index fell 0.3%

  • The euro rose 0.2% to $1.0147

  • The Japanese yen rose 0.4% to 142.25 yen per dollar

  • The offshore yuan was down 0.1% at 6.9267 per dollar

  • The British pound rose 0.4% to $1.1731

Bindings

  • The 10-year bond yield fell three basis points to 3.32%

  • Germany’s 10-year yield was little changed at 1.66%

  • Britain’s 10-year yield rose one basis point to 3.09%

Goods

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