US Futures Decline With All Eyes on PCE Inflation: Markets Wrap

(Bloomberg) -- Global stocks and US stock-index futures fell as investors braced for data that may show accelerating inflation in the world’s largest economy. The dollar rose amid concern over disappointing earnings and geopolitical tensions.

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Contracts on the S&P 500 and Nasdaq 100 slipped at least 0.6% each. European stocks erased gains. Chinese technology stocks led a selloff in Asia amid signs price wars and cash burns are undermining profits. The yen declined after the nominee for the Bank of Japan’s top job signaled continuity of loose monetary policy.

Traders await the Federal Reserve’s preferred measure of inflation — the Personal Consumption Expenditures Price Index — for their next catalyst as they navigate through tightening monetary conditions. But central banks’ determination to take rates for higher for longer is not their only worry: decelerating growth, sluggish corporate performance, geopolitical tensions from Russia to North Korea, and centralization of power in China all complicate the investment landscape.

“Investors worry that this unexpected strength in the US economy, coupled with a steady reopening of the Chinese economy, will fuel further inflation which would lead the Fed to pursue a more aggressive tightening cycle,” said Geir Lode, the head of global equities at Federated Hermes. “Looking ahead, we see mixed signals: leading economic indicators continue to point to a recession, but lagging economic indicators show no signs of weakness, yet.”

A gauge of Chinese technology stocks listed in Hong Kong tumbled 3.3%. NetEase Inc. slumped after a profit miss, while Alibaba Group Holding Ltd. fell as analysts remained cautious about its sales growth prospect. Meanwhile, Chinese President Xi Jinping was set to bring decision-making of the financial system further under his control with the revival of a powerful committee.

The dollar advanced for the third time in four days. Treasuries declined across the curve, with the two-year yield adding three basis points.

The yen fell 0.7% against the dollar. Japan’s inflation accelerated beyond 4% to set a fresh four-decade high, even as Bank of Japan Governor nominee Kazuo Ueda said the central bank should continue with stimulus for now.

Europe’s Stoxx 600 gauge erased gains of as much as 0.5% as traders focused on earnings reports and data that showed Germany’s gross domestic product contracted 0.4% in the fourth quarter, more than expected.

In commodities, oil extended Thursday’s advance amid strength in commodity currencies and optimism over China’s reopening. Bitcoin was on pace for its second monthly advance, breaking with stocks and other riskier assets that have slid amid renewed concern about rising interest rates.

Key events this week:

US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday

Russia’s invasion of Ukraine hits the one-year mark, Friday

Some of the main moves in markets:


S&P 500 futures fell 0.6% as of 7:42 a.m. New York time

Nasdaq 100 futures fell 0.8%

Futures on the Dow Jones Industrial Average fell 0.6%

The Stoxx Europe 600 fell 0.1%

The MSCI World index fell 0.2%


The Bloomberg Dollar Spot Index rose 0.4%

The euro fell 0.2% to $1.0577

The British pound fell 0.3% to $1.1981

The Japanese yen fell 0.7% to 135.61 per dollar


Bitcoin rose 0.2% to $23,913.85

Ether rose 0.2% to $1,647.89


The yield on 10-year Treasuries advanced three basis points to 3.91%

Germany’s 10-year yield advanced two basis points to 2.50%

Britain’s 10-year yield advanced two basis points to 3.60%


West Texas Intermediate crude rose 0.8% to $75.97 a barrel

Gold futures fell 0.1% to $1,824.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Cecile Gutscher.

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