Stocks Decline on Speculation of Sticky Inflation

Introduction

Stocks declined on speculation US inflation data may show price pressures remain sticky, adding to risks policymakers will keep interest rates higher for longer.

Key Points

• Europe’s Stoxx 600 gauge fell 0.4% and German bunds slipped.
• Money markets boosted wagers on European Central Bank policy tightening at its meeting Thursday.
• The pound extended losses to a three-month low after the UK economy shrank at the quickest pace in seven months.
• Traders are focused on the US consumer price report, with data expected to send a mixed message on the US economy.
• “All eyes are on US core CPI later today,” said Chetan Seth, a strategist at Nomura Holdings Inc. in Singapore.
• West Texas Intermediate climbed for a second day and Brent extended gains above $92 per barrel.
• US stock futures edged lower after a rout in technology companies Tuesday.
• Treasury two-year yields stayed above 5%, while their 10-year peers held at 4.29%.
• The dollar traded in a narrow range against its Group-of-10 peers ahead of the CPI data.
• The yen weakened for a second day.
• There’s been a “dramatic shift” in investors’ equity allocation, namely a rush toward the US and an exodus from emerging markets.
• Chinese property developers rallied on news that Country Garden Holdings Co. won creditor support to extend repayment on seven yuan bonds.

US Inflation Data

Traders are focused on the US consumer price report, with data expected to send a mixed message on the US economy, according to Bloomberg Economics. Monthly headline inflation is seen at 0.6%, while annualized core inflation will stay near the Fed’s 2% target for a third straight month.

“All eyes are on US core CPI later today,” said Chetan Seth, a strategist at Nomura Holdings Inc. in Singapore. “With oil up more than 10% in just over two weeks, stock investors would be hoping not to see a punchy inflation reading tonight as it might give support to the theme of higher-for-longer Fed rate.”

Stock Futures and Technology Companies

US stock futures edged lower after a rout in technology companies Tuesday saw the Nasdaq 100 slide 1.1%. Apple, which unveiled the iPhone 15 and other products, dropped almost 2%.

Investor Allocation and Chinese Property Developers

There’s been a “dramatic shift” in investors’ equity allocation, namely a rush toward the US and an exodus from emerging markets, Bank of America Corp.’s latest global fund manager survey showed. Chinese property developers rallied on news that Country Garden Holdings Co. won creditor support to extend repayment on seven yuan bonds.

Key Events This Week

• Eurozone industrial production, Wednesday
• UK industrial production, Wednesday
• US CPI, Wednesday
• Tech leaders including Tesla’s Elon Musk and Meta Platforms’ Mark Zuckerberg are set to attend a forum on the future of AI convened by Senator Chuck Schumer, Wednesday
• Japan industrial production, Thursday
• European Central Bank policy meeting and news conference by President Christine Lagarde, Thursday
• US retail sales, PPI, business inventories, initial jobless claims, Thursday
• China property prices, retail sales, industrial production, Friday
• US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday

Stocks

• The Stoxx Europe 600 fell 0.5% as of 8:10 a.m. London time
• S&P 500 futures fell 0.1%
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index fell 0.2%
• The MSCI Emerging Markets Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.2% to $1.0734
• The Japanese yen fell 0.1% to 147.24 per dollar
• The offshore yuan rose 0.1% to 7.2911 per dollar
• The British pound fell 0.3% to $1.2447

Cryptocurrencies

• Bitcoin fell 0.4% to $25,979.25
• Ether fell 0.6% to $1,588.86

Bonds

• The yield on 10-year Treasuries was little changed at 4.29%
• Germany’s 10-year yield advanced two basis points to 2.66%
• Britain’s 10-year yield was little changed at 4.41%

Commodities

• Brent crude rose 0.2% to $92.28 a barrel
• Spot gold fell 0.2% to $1,910.12 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller and Youkyung Lee.