Stocks Struggle for Momentum Before US PPI Data: Markets Wrap

(Bloomberg) — European equity futures struggled for momentum and stocks in Asia traded little changed, with investors awaiting readings on US inflation for clues on the Federal Reserve’s interest-rate path.

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Euro Stoxx 50 futures signaled a muted start, while an Asia Pacific equity gauge was little changed, with Hong Kong and Chinese shares in the red. Japanese stocks climbed, supported by an advance in commodity companies and a slightly weak yen.

“Markets have a close eye on US producer price data later today, as it could be used to confirm or deny this week’s hotter CPI report,” said Matt Simpson, a senior market strategist at City Index Inc. “That seems to be suppressing volatility more than usual in today’s Asian session, not helped by the lack economic data this session.”

Sentiment remained fragile in Chinese markets despite officials pledging central government funds to encourage consumers and businesses to replace old equipment and goods. Shares linked to Asian copper miners advanced after the metal jumped to an 11-month high on likely capacity cuts at Chinese smelters.

Meanwhile, contracts for US equities ticked marginally higher after a listless US session on Wednesday with the S&P 500 ending lower and the tech-heavy Nasdaq 100 falling 0.8%.

Following a hot reading consumer inflation, the US producer price index due later Thursday likely rose amid a rebound in energy prices, according to Estelle Ou at Bloomberg Economics.

Other US data in the pipeline this week will offer further signs of the health of the US economy and the effect of monetary policy. The Federal Reserve’s interest rate decision is due next week.

FX Lethargy

Treasuries steadied in Asia after selling off Wednesday with the 10-year yield rising four basis points, while an index of the dollar was little changed.

The yen weakened for a third day ahead of Friday briefing by Rengo — Japan’s largest umbrella group for labor unions — on annual wage negotiations. The Bank of Japan will decide whether to raise interest rates this month after officials see the initial tally from the spring wage talks.

BOJ officials were also considering an end to exchange-traded fund purchases the central bank began in 2010, according to people familiar with the matter. The move came as inflation in Japan rises toward the BOJ’s target.

Markets are getting very comfortable with a soft-landing scenario lubricated by almost-synchronized global central bank easing, according to Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore. “At this point, it’s fair to say that nothing much is really happening in FX space, except perhaps for the yen,” he wrote in a note. “We’ll need some sort of global market shock to shake FX out of its lethargy.”

In commodities, oil held the biggest gain in about five weeks after US crude stockpiles shrunk and Ukraine attacked another Russian refinery. Gold steadied.

Elsewhere, Nippon Steel Corp. fell on a report that President Joe Biden is expected to soon release a statement of concern about the company’s proposed purchase of United States Steel Corp. US Steel dropped as much as 15%, its biggest intraday loss since June 2020.

Key events this week:

  • US PPI, retail sales, initial jobless claims, business inventories, Thursday

  • China property prices, Friday

  • Japan’s largest union federation announces results of annual wage negotiations, just ahead of Bank of Japan policy meeting, Friday

  • Bank of England issues inflation survey, Friday

  • US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 6:30 a.m. London time

  • Nasdaq 100 futures rose 0.3%

  • Euro Stoxx 50 futures were little changed

  • Japan’s Topix rose 0.5%

  • Australia’s S&P/ASX 200 fell 0.2%

  • Hong Kong’s Hang Seng fell 0.9%

  • The Shanghai Composite fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0940

  • The Japanese yen was little changed at 147.90 per dollar

  • The offshore yuan was little changed at 7.1973 per dollar

  • The Australian dollar was little changed at $0.6617

  • The British pound was little changed at $1.2793

Cryptocurrencies

  • Bitcoin rose 0.6% to $73,598.01

  • Ether was little changed at $3,992.25

Bonds

Commodities

  • West Texas Intermediate crude was little changed

  • Spot gold fell 0.2% to $2,169.06 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.

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