(Bloomberg) — European stocks steadied and Wall Street equity futures pared their losses as investors weighed how the latest inflation data from the US and the UK will affect the outlook for interest rates and as they digested results from major companies.
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Europe’s Stoxx 600 erased a drop, supported by gains in consumer stocks. Barclays Plc slumped the most in more than 11 months after the bank’s earnings missed estimates. Deutsche Lufthansa AG fell after the airline grounded all flights, citing issues with its computer systems.
Contracts for the S&P 500 trimmed a decline, after the index ended flat on Tuesday. Nasdaq 100 futures also slid after the gauge, which is more sensitive to higher interest rates, rose 0.7% on Tuesday. Airbnb Inc. rallied in premarket trading after the home-sharing company gave a revenue outlook that beat analysts’ estimates.
Investors are evaluating US CPI data that showed prices rose more than forecast, and subsequent comments from Federal Reserve officials. UK inflation also remains stubbornly high, in double digits and five times above the Bank of England’s target, according to data out Wednesday. Still, the pound weakened as CPI fell more than expected in January. Traders trimmed their bets on further rate hikes and gilts rallied.
The dollar edged higher against all of its Group-of-10 peers. The two-year Treasury yield ticked lower after adding 10 basis points Tuesday. The 10-year Treasury benchmark slipped after falling four basis points in the prior session.
“We are in a trading market with a number of cross currents,” said Frederique Carrier, head of investment strategy at RBC Wealth Management. “People are trying to gauge the peak for interest rates but tightening monetary policy is likely to continue, while later in the year there is the likelihood of recession that could put a downer on prices.”
Federal Reserve Bank of Philadelphia President Patrick Harker said the Fed was nearing the point where rates were restrictive enough. “In my view, we are not done yet,” he said. “But we are likely close.”
Harker’s Richmond Fed counterpart Thomas Barkin told Bloomberg TV that the central bank might “have to do more”to fight inflation and Dallas Fed President Lorie Logan said rate increases could last “for a longer period than previously anticipated.”
“Inflation is still falling, but it’s not falling as quickly as we hoped,” Benjamin Kirby, co-head of investments for Thornburg Investment Management, said in an interview with Bloomberg TV. “The overall narrative is pretty much intact,” he added. “The Fed is nearing its terminal rate.”
Elsewhere in stocks, Turkey’s Borsa Istanbul 100 Index rose more than 9% as trading resumed after a week-long suspension following the devastating earthquakes that struck the country’s southeast, with authorities throwing their full weight behind investors to avoid a repeat of last week’s rout.
Oil fell for a second day after after an industry estimate pointed to a large build in US inventories and investors assessed the outlook for US monetary policy. The International Energy Agency boosted forecasts for global oil demand as China reopens its economy following years of anti-Covid lockdowns. Gold dropped.
Key events:
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US retail sales Wednesday
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US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday
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France CPI, Russia GDP Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 was little changed as of 10:03 a.m. London time
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S&P 500 futures fell 0.4%
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Nasdaq 100 futures fell 0.5%
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Futures on the Dow Jones Industrial Average fell 0.2%
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The MSCI Asia Pacific Index fell 1.2%
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The MSCI Emerging Markets Index fell 1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.4%
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The euro fell 0.1% to $1.0725
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The Japanese yen fell 0.1% to 133.33 per dollar
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The offshore yuan fell 0.2% to 6.8479 per dollar
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The British pound fell 0.6% to $1.2094
Cryptocurrencies
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Bitcoin fell 0.4% to $22,174.3
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Ether fell 0.3% to $1,551.35
Bonds
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The yield on 10-year Treasuries declined one basis point to 3.73%
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Germany’s 10-year yield declined three basis points to 2.41%
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Britain’s 10-year yield declined 11 basis points to 3.41%
Commodities
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Brent crude fell 1.3% to $84.49 a barrel
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Spot gold fell 1% to $1,836.59 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar, Richard Henderson, Tony Jordan and Sujata Rao.
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