US futures rise as CPI bets keep bonds on edge: Markets fold

(Bloomberg) — U.S. stock index futures rose while bonds slipped as investors remained on edge ahead of a report expected to show inflation in the world’s biggest economy eased for a fourth straight month.

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December contracts for the S&P 500 and Nasdaq 100 added at least 0.3 percent each, a day after the underlying indexes fell to one-week lows amid a murky midterm verdict and turmoil in the cryptocurrency industry. Gen Digital Inc. jumped in the premarket session in New York as its earnings matched estimates. Bonds fell, with yield curves falling. The dollar traded between gains and losses, while oil extended its slide for a fourth day.

Investors are looking for stronger signs of peak US inflation that could herald a slowdown in the pace and severity of the Federal Reserve’s monetary tightening. While economists forecast annual inflation to have eased to 7.9% for October, traders remain cautious as the gauge has repeatedly topped forecasts this year. According to a scenario analysis by JPMorgan Chase & Co., the S&P 500 could rise more than 5% if the price falls to 7.6% or lower, but a higher-than-estimated rate would trigger a 6% decline.

“CPI is the focus of attention,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note. “An upside surprise could be temporarily painful given the current risk dynamics. Investors are still incredibly jittery due to the crypto train wreck, US election bets that failed to materialize and the seemingly endless Covid malaise in China.”

Two-year notes, the most sensitive to monetary policy, fell as the yield added 3 basis points. The 10-year interest rate rose by 1 basis point.

In the US midterms, Republicans cruised to control of the House by narrower-than-expected margins, while the Senate race continued. That defied investors’ expectations of a GOP surge and subsequent congressional gridlock seen as positive for risk sentiment. Both the S&P 500 and Nasdaq 100 fell more than 2% on Wednesday.

Disappointment was echoed in Asia and Europe on Thursday. An index of Chinese technology shares in Hong Kong lost more than 3 percent, with heavyweights Tencent Holdings Ltd. and Alibaba Group Holding Ltd. to retreat ahead of their gains next week. Shares in mainland China also fell as the nation tightened Covid restrictions in some of its biggest cities, killing expectations of an easing of its pandemic policy. The Stoxx 600 index was dragged down by the real estate, retail and commodities sectors.

China’s Covid struggles also weighed on the oil demand outlook, sending West Texas Intermediate crude futures sliding towards $85 a barrel.

This week’s brutal sell-off in cryptocurrencies has eased, even as sentiment remained subdued as FTX.com looked at the possibility of bankruptcy if an $8 billion bailout is not met. Bitcoin traded around $16,600.

In early New York trading, Gen Digital rose 4.3 percent after posting second-quarter earnings per share in line with expectations. Shares in AstraZeneca Plc rose 2.4% as the drugmaker raised guidance after posting better-than-expected quarterly results.

Key events this week:

  • US CPI, US initial jobless claims, Thursday

  • Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday

  • US University of Michigan Consumer Sentiment, Friday

Some of the main movements in the markets:

inventories

  • The Stoxx Europe 600 was down 0.1% at 9:42 a.m. London time

  • S&P 500 futures rose 0.3%

  • Nasdaq 100 futures rose 0.4%

  • Dow Jones Industrial Average futures rose 0.3%

  • MSCI Asia Pacific fell 1.2%

  • MSCI Emerging Markets fell 1.4%

currency

  • The Bloomberg Dollar Spot index was little changed

  • The euro fell 0.4% to $0.9975

  • The Japanese yen was slightly lower at 146.35 per dollar

  • The offshore yuan was up 0.2% at 7.2575 per dollar

  • The British pound rose 0.2% to $1.1380

Cryptocurrencies

  • Bitcoin rose 6% to $16,672.45

  • Ether rose 8% to $1,194.49

Bindings

  • The 10-year bond yield rose one basis point to 4.10%

  • Germany’s 10-year yield rose one basis point to 2.18%

  • Britain’s 10-year yield rose four basis points to 3.50%

Goods

–With help from Richard Henderson.

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