Stocks, US Futures Muted as Traders Await US CPI: Markets Wrap

(Bloomberg) — Global stock trading was muted as investors awaited US inflation data that may shed light on the Federal Reserve’s next policy move.

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Gauges of US futures, European and Asia Pacific equities were little changed, a sign investors are holding back on taking new positions before data that could stoke volatility across global markets. Treasury two-year yields climbed further above 4%, while the dollar was broadly lower.

US headline inflation is expected to slow, with the core reading forecast to ease both on a monthly and yearly basis, supporting market expectations that the Fed will deliver one more rate hike before a pause and pivot to easier policy in the second half of the year.

“We think the strong employment report, hawkish tone of recent Fedspeak, and our expectations for a firm CPI report all point to one more rate hike in May, absent another bout in market stress,” Tiffany Wilding, Pacific Investment Management Co.’s North America economist, wrote in a note.

Fed officials treading a thin line between the need to curb inflation and stabilize wobbly banks sent mixed messages on Tuesday. Chicago Fed President Austan Goolsbee argued the central bank should exercise “prudence and patience,” while New York Fed President John Williams said officials have more work to do to tackle inflation.

Swap contracts are pricing in about three-in-four odds of another quarter-point Fed hike next month. Traders predict US rates will peak around 5%, with policymakers then cutting by at least 50 basis points by year-end.

Read more: US PREVIEW: Soft March CPI Print to Fuel Fed Rate-Cut Bets

The dollar weakened against most of its Group-of-10 peers, while the euro advanced for a second day. The yen was the only major currency to fall versus the greenback, extending its decline into a fifth day.

Elsewhere, Bitcoin dropped back below $30,000 after rising above that level on Tuesday for the first time in 10 months. Oil steadied as traders tracked supply constraints and gold edged higher.

Key events this week:

Canada rate decision, Wednesday
US FOMC minutes, CPI, Wednesday
Richmond Fed’s Thomas Barkin speaks, Wednesday
China trade, Thursday
US PPI, initial jobless claim, Thursday
US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 was little changed as of 8:28 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.1%
Futures on the Dow Jones Industrial Average rose 0.1%
The MSCI Asia Pacific Index fell 0.1%
The MSCI Emerging Markets Index fell 0.5%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0922
The Japanese yen was little changed at 133.73 per dollar
The offshore yuan was little changed at 6.8928 per dollar
The British pound was little changed at $1.2420

Cryptocurrencies

Bitcoin fell 0.6% to $30,024.91
Ether fell 1.1% to $1,873.88

Bonds

The yield on 10-year Treasuries was little changed at 3.43%
Germany’s 10-year yield was little changed at 2.30%
Britain’s 10-year yield declined two basis points to 3.52%

Commodities

Brent crude rose 0.3% to $85.87 a barrel
Spot gold rose 0.5% to $2,013.60 an ounce

This story was produced with the assistance of Bloomberg Automation.