Wednesday, April 17, 2024

Futures Dip Before Fed’s Preferred Inflation Gauge: Markets Wrap

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(Bloomberg) — US equity futures edged lower and bond yields eased Friday ahead of the release of a crucial US inflation gauge that could cement the case for Federal Reserve interest-rate cuts from March.

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Ten-year US Treasury yields dropped three basis points, holding just off five-month troughs, while British government borrowing costs also slipped to approach eight-month lows after data showed the UK economy unexpectedly shrank in the third quarter.

While markets have rallied in recent weeks off the mounting wagers on central bank policy easing, the UK figures will increase alarm over slowing economic growth across the developed world. Thursday’s downward revision to US third-quarter GDP and weak results at sports apparel giant Nike Inc. are underscoring those concerns.

Europe’s Stoxx 600 index flatlined, though technology stocks lost ground, dragged down by Prosus NV, which plunged by a record 20% after China unveiled new curbs on online gaming. Adidas AG and Puma SE also slumped, following a weak report from US rival Nike Inc. late on Thursday, while Delivery Hero SE extended losses after announcing job cuts.

Futures on the US Nasdaq 100 and S&P 500 retreated slightly, with Nike down more than 11% in New York premarket trading after the company said it’s looking for as much as $2 billion in cost savings amid a weaker sales outlook. US-listed Chinese online-game maker NetEase Inc. fell 24% and video platform Bilibili Inc. shed 11%.

The main focus for traders ahead of the long Christmas weekend is the US core personal consumption expenditures price index — the Fed’s preferred inflation metric. Economists surveyed by Bloomberg predict it slipped in November to 3.3%, from 3.5% the previous month.

Swaps traders are pricing in around 150 basis points of Fed cuts next year, twice as much as the central bank has signaled.

“Today’s PCE numbers — if they print in line with expectations — will simply encourage market views that the FOMC will be cutting rates at either the March or the May meeting,” said Stuart Cole, head macro economist at Equiti Capital.

The data could determine whether the S&P 500 can notch an eight-week winning streak — its longest in more than five years — and give fresh impetus to the rally in US Treasuries. Yields have slid more than more 40 basis points this month.

Earlier, Chinese government bonds rallied, with ultra-long yields at the lowest in nearly two decades after a fresh round of deposit rate cuts at large banks. Chinese gaming stocks were dragged lower, with Tencent Holdings Ltd. ending down 12% in Hong Kong, the most since October 2008.

Oil extended its biggest weekly gain in two months as shippers avoided the Red Sea amid increased attacks, while Angola’s exit from OPEC after 16 years put the spotlight on the group’s unity.

Key events this week:

  • US personal income and spending, new home sales, durable goods, University of Michigan consumer sentiment index, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 was little changed as of 10:25 a.m. London time

  • S&P 500 futures fell 0.1%

  • Nasdaq 100 futures fell 0.2%

  • Futures on the Dow Jones Industrial Average fell 0.3%

  • The MSCI Asia Pacific Index was little changed

  • The MSCI Emerging Markets Index fell 0.5%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro was little changed at $1.1015

  • The Japanese yen was little changed at 142.09 per dollar

  • The offshore yuan rose 0.1% to 7.1340 per dollar

  • The British pound rose 0.2% to $1.2710

Cryptocurrencies

  • Bitcoin fell 0.6% to $43,721.32

  • Ether rose 2.8% to $2,310.61

Bonds

  • The yield on 10-year Treasuries declined three basis points to 3.86%

  • Germany’s 10-year yield was little changed at 1.96%

  • Britain’s 10-year yield declined two basis points to 3.51%

Commodities

  • Brent crude rose 0.8% to $80.03 a barrel

  • Spot gold rose 0.5% to $2,055.95 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Divya Patil.

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