(Bloomberg) — European stocks fell Friday as traders weighed the economic threat of virus restrictions and awaited key U.S. inflation data.
Technology shares led a decline in Europe’s Stoxx 600 Index. U.S. contracts rose after benchmarks ended a three-day rally. A Bloomberg gauge of Asian airlines dropped as much as 1.7% on Friday, the most in two weeks.
Investors have been rattled this week by a flare-up in coronavirus infections and a wave of new restrictions. They’re looking to U.S. consumer inflation numbers on Friday and meetings next week by central banks on both sides of the Atlantic for clues on the pace of tapering and interest rate increases.
The dollar added to gains after a report on Thursday showed applications for U.S. state unemployment benefits declined to the lowest level since 1969, though economists flagged difficulties in seasonal adjustments to arrive at that figure. Bond yields ticked up, while oil fell.
“Various FOMC participants, including Chair Powell, have signaled a hawkish shift in their policy stance, catalyzed by increasing discomfort with elevated inflation against a backdrop of robust growth and ongoing strengthening in labor markets conditions,” Morgan Stanley economists and strategists including Ellen Zentner, wrote in a note Thursday. “We revise our Fed call and now expect the FOMC to begin raising rates in Sept. 2022 — two quarters earlier than our prior forecast.”
China’s central bank took further steps to limit the yuan’s strength — setting the weakest reference rate relative to estimates compiled by Bloomberg since 2018 — a day after policy makers raised the foreign currency reserve requirement ratio for banks a second time this year. The yuan shrugged off the moves to advance further.
Bloomberg’s Markets Live team is running a survey on asset views for 2022. It’s anonymous, takes about 2 minutes, and the results will be shared in the latter part of December. To participate, click here.
Here are some key events to watch this week:
- U.S. CPI Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets as of 7:12 a.m. in London:
Stocks
- The Stoxx Europe 600 fell 0.3% as of 8:47 a.m. London time
- Futures on the S&P 500 rose 0.2%
- Futures on the Nasdaq 100 rose 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.3%
- The MSCI Emerging Markets Index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.1287
- The Japanese yen fell 0.1% to 113.62 per dollar
- The offshore yuan was little changed at 6.3737 per dollar
- The British pound was little changed at $1.3208
Bonds
- The yield on 10-year Treasuries advanced one basis point to 1.51%
- Germany’s 10-year yield advanced two basis points to -0.34%
- Britain’s 10-year yield advanced one basis point to 0.77%
Commodities
- Brent crude fell 0.3% to $74.22 a barrel
- Spot gold fell 0.2% to $1,772.21 an ounce
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