(Bloomberg) — Stocks traded mixed ahead of a key inflation report amid concern the Federal Reserve has waited too long to ease monetary policy. The yen gained after a Bank of Japan official signaled more interest rate increases.
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The European stocks benchmark added 0.4%, while Asian equities slid and futures in the US stocks slipped 0.3%.
Worries over slowing growth in major economies have resurfaced with oil trading below $70 and global bond yields retreatuing to a two-year low this week. Investors’ attention is on the US consumer price index due later Wednesday — expected to show another month of muted increases — and the Fed policy meeting next week.
“There is a lot of uncertainty ahead of next week’s expected rate cut,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privee in Singapore.
The debate between Vice President Kamala Harris and former President Donald Trump was also in focus, though market responses were limited. Harris’ odds of winning the election increased on the betting website PredictIt to 56%, compared with 53% before the debate. Trump’s support of the crypto sector saw Bitcoin slip.
Traders in the US interest-rate options market are still betting on at least one 50 basis-point Fed rate cut this year — just probably not before the Nov. 5 election.
“Downside volatility” is possible if Wednesday’s inflation print comes in hot, given the market’s expectations for aggressive cuts, said Sameer Samana at Wells Fargo Investment Institute. “A cooler print has more two-way risk as it creates more room for the Fed to cut, but may also indicate the economy is slowing faster than anticipated.”
Yen Strength
Separately, the yen advanced to its strongest level against the greenback since December, wiping out its losses for the year, after BOJ policy member Junko Nakagawa said the central bank will continue to adjust the degree of easing. Most economists surveyed expected the central bank to wait until December or January before raising rates again, with the next decision scheduled for next week.
Nakagawa’s remarks “make markets think the BOJ may hike rates earlier and faster, possibly this year,” pushing up the yen, said Shoki Omori, chief desk strategist at Mizuho Securities Co.
West Texas Intermediate crude rebounded on Wednesday after plummeting as much as 5% in its previous session. Crude has tumbled by almost a fifth so far this quarter on concerns that slowing growth in the US and China, the leading consumers, will crimp demand at a time of robust and expanding supplies.
Key events this week:
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US CPI, Wednesday
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Japan PPI, Thursday
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ECB rate decision, Thursday
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US initial jobless claims, PPI, Thursday
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Eurozone industrial production, Friday
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Japan industrial production, Friday
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U. Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.4% as of 8:17 a.m. London time
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S&P 500 futures fell 0.2%
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Nasdaq 100 futures fell 0.2%
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Futures on the Dow Jones Industrial Average fell 0.2%
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The MSCI Asia Pacific Index fell 0.4%
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The MSCI Emerging Markets Index fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.2% to $1.1045
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The Japanese yen rose 0.7% to 141.51 per dollar
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The offshore yuan rose 0.2% to 7.1180 per dollar
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The British pound was little changed at $1.3090
Cryptocurrencies
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Bitcoin fell 1.7% to $56,605.56
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Ether fell 1.8% to $2,336.44
Bonds
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The yield on 10-year Treasuries declined two basis points to 3.62%
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Germany’s 10-year yield declined one basis point to 2.12%
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Britain’s 10-year yield declined two basis points to 3.80%
Commodities
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Brent crude rose 1.2% to $70.05 a barrel
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Spot gold rose 0.4% to $2,525.92 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Masaki Kondo and Marcus Wong.
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