US Futures Decline as Focus on Key Inflation Data: Markets Wrap

(Bloomberg) — U.S. stock futures fell as investors prepared to print the Federal Reserve's key inflation measure, which will help determine the future path of interest rates. Bitcoin's rally extended above $63,000.

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The S&P 500 and the tech-heavy Nasdaq 100 futures fell about 0.3%. European stocks were volatile during another busy day on the earnings calendar. Moncler SpA shares rose after the Italian luxury company's profits beat expectations. Air France-KLM fell after reporting a loss in the fourth quarter. Anheuser-Busch InBev shares fell after missing analysts' earnings estimates.

Traders are eyeing key US personal consumer spending gauge data due later Thursday, which is likely to highlight the bumpy path the Federal Reserve faces in achieving its 2% inflation target. The PCE reading is expected to confirm recent comments from central bank officials showing no rush to ease monetary policy.

The hotter-than-expected inflation reading “could put the final nail in the coffin of the idea of ​​pivoting to cutting interest rates before the summer,” said Ross Mould, investment director at AJ Bell.

In Asia, the region's stock gauge rose after Chinese stocks rebounded. The yen rose the most in more than a week against the dollar after Bank of Japan board member Hajime Takata indicated that the case for ending negative interest rate policy is gaining momentum.

Bitcoin extended its gains after rising above $60,000 for the first time in more than two years on Wednesday, reflecting new demand from exchange-traded funds. The currency touched approximately $64,000. The 2021 record is just under $69,000.

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The dollar gauge weakened, while Treasury yields rose after Wednesday's bond rally that saw the 10-year yield fall four basis points and the policy-sensitive two-year yield fall six basis points.

Stocks cap off a strong February, with the S&P 500 and Nasdaq 100 rising more than 4% after excitement over artificial intelligence led to a record tech-fueled rally on Wall Street. MSCI's global stock index rose for a fourth month, its longest winning streak since 2021.

For Ulrich Urban, head of multi-asset strategy and research at Berenberg, trading on the last day of February is likely to be influenced more by the end-of-month rebalancing than by the data, as inflation trends have already been priced into markets following this month's consumer report. and producer price reports.

“Focusing on personal consumption expenditures because that's what the Fed cares about is right,” Urban said. “But it's mostly already baked into the cake. Markets will be more affected by some rebalancing flows as stocks have significantly outperformed bonds this year.

New York Fed President John Williams said Wednesday that the central bank has “a ways to go” in its fight against inflation, and Atlanta Fed President Raphael Bostic urged patience regarding policy adjustment.

Traders are currently pricing in about 80 basis points of easing by the end of the year — roughly in line with what officials indicated in December as the most likely outcome. This equates to three cuts in 2024 – where the Fed's moves have historically been 25 basis point increases. To put things in perspective, swaps were anticipating roughly 150 basis points of cuts this year at the beginning of February.

Main events this week:

• German Consumer Price Index, Thursday

• US consumer income, personal consumption expenditures deflator, initial jobless claims, Thursday

• The Fed's Austan Goolsbee, Raphael Bostic and Loretta Mester speak on Thursday

• China's official PMI, Caixin Manufacturing PMI, Friday

• Eurozone S&P Global Manufacturing PMI, CPI, Unemployment, Friday

• Bank of England chief economist Huw Bell speaks on Friday

• US Construction Spending, ISM Manufacturing Index, University of Michigan Consumer Confidence, Friday

• The Fed's Raphael Bostic and Mary Daly speak on Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was up 0.1% as of 9:21 a.m. London time

• S&P 500 futures fell 0.3%

• Nasdaq 100 futures fell 0.3%

• Dow Jones Industrial Average futures fell 0.4%.

• The MSCI Asia Pacific Stock Index rose 0.4%.

• The MSCI Emerging Markets Index rose 0.2%.

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%.

• The euro rose 0.1 percent to $1.0849

• The Japanese yen rose 0.6% to 149.80 per dollar

• There was little change in the yuan in external transactions at 7.2087 to the dollar

• There was little change in the pound sterling at $1.2663

Digital currencies

• Bitcoin rose 3.3% to $62,556.96

• Ethereum rose 4.2% to $3,461.75

Bonds

• The yield on the 10-year Treasury note rose three basis points to 4.29%.

• The yield on 10-year German bonds rose two basis points to 2.48%.

• The yield on British 10-year bonds rose two basis points to 4.20%.

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This story was produced with assistance from Bloomberg Automation.

–With assistance from Chiranjeevi Chakraborty and Richard Henderson.

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