(Bloomberg) — European stocks slipped with U.S. futures as investors digested the latest read on American inflation and assessed bets on timing for the first rate increases by Federal Reserve in the pandemic era.
The Stoxx Europe 600 Index traded slightly lower after two days of gains, with technology and miners offsetting declines in travel and leisure and consumer products. Contracts on both the S&P 500 and Nasdaq 100 pointed lower.
The pound advanced to its highest level since Oct. 29 despite calls for U.K. Prime Minister Boris Johnson to resign over a “bring your own bottle” party at the height of a lockdown meant to stem the first wave of coronavirus infections in 2020.
The dollar underperformed all its Group of 10 peers as traders moved beyond a recent preoccupation with hedging the speed and intensity of future U.S. rate increases. Bets that the Fed will embark on rate liftoff in March appear to be priced in following the U.S. inflation data Wednesday in-line with forecasts.
The U.S. inflation read came after Fed Chair Jerome Powell vowed to contain the worst price pressures in nearly four decades without derailing the economic recovery from the pandemic. In prepared remarks, Fed Governor Lael Brainard said tackling inflation while sustaining an inclusive recovery is the U.S. central bank’s most pressing task.
“Inflation is going to be with us no matter if they increase rates and the challenges of the economy here are just going to build on that,” Shana Sissel, Strategic Wealth Partners chief market strategist, said on Bloomberg Television. “I am concerned that there is going to be quite a bit of volatility in the market and our economy is going to slow down considerably.”
Fed St. Louis President James Bullard told the Wall Street Journal that four rate increases may be warranted this year amid high inflation. Separately, Fed Bank of Cleveland President Loretta Mester and Atlanta Fed leader Raphael Bostic backed hiking rates as soon as March.
Elsewhere, oil held an advance on signs of tighter supply. Bitcoin traded around $44,000 as the inflation numbers rekindled the debate about whether the cryptocurrency is a hedge against rising consumer prices.
Here are some key events this week:
- U.S. initial jobless claims, PPI on Thursday.
- U.S. Senate Banking Committee hearing for Lael Brainard, nominated as Fed vice-chair, on Thursday.
- Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker, Chicago Fed President Charles Evans speak on Thursday.
- Bank of Korea policy decision and briefing on Friday.
- Wells Fargo, Citigroup, JPMorgan due to report earnings on Friday.
- U.S. business inventories, industrial production, University of Michigan consumer sentiment, retail sales on Friday.
- New York Fed President John Williams speaks Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.3% as of 9:19 a.m. London time
- Futures on the S&P 500 were little changed
- Futures on the Nasdaq 100 fell 0.1%
- Futures on the Dow Jones Industrial Average fell 0.1%
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.3% to $1.1471
- The Japanese yen was little changed at 114.56 per dollar
- The offshore yuan was little changed at 6.3661 per dollar
- The British pound rose 0.3% to $1.3739
Bonds
- The yield on 10-year Treasuries was little changed at 1.75%
- Germany’s 10-year yield advanced two basis points to -0.04%
- Britain’s 10-year yield advanced two basis points to 1.16%
Commodities
- Brent crude was little changed
- Spot gold fell 0.3% to $1,821.24 an ounce
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