US futures rise as CPI bets keep bonds on edge: markets wrap

US stock-index futures rose, while European equities opened lower, as investors remained on the edge before a report projected to show inflation in the world’s largest economy moderated for a fourth successive month.

December contracts on the S&P 500 and Nasdaq 100 added at least 0.3% each, a day after the underlying indexes tumbled to one-week lows amid a blurry midterms verdict and crypto-industry turmoil. Europe’s equity benchmark dropped for a second day. Treasuries traded mixed, with shorter-term yields rising. The dollar fluctuated between gains and losses, while oil extended its slide to a fourth day.

Investors are looking for firmer signs of a peak in US inflation that could herald a slowdown in the pace and severity of the Federal Reserve’s monetary tightening. While economists forecast year-on-year headline inflation fell to 7.9% for October, traders remain cautious given the reading has repeatedly overshot projections this year. According to a scenario analysis by JPMorgan Chase & Co., the S&P 500 could rally more than 5% if the reading falls to 7.6% or below, but a higher-than-estimated figure would spark a 6% slump.

“The consumer price index is the center 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-off momentum. Investors are still incredibly jittery due to the crypto train wreck, US election bets that failed to materialize, and the seemingly never-ending Covid malaise in China.”

Two-year Treasuries, the most sensitive to monetary policy, fell as the yield added 2 basis points. The 10-year bond advanced as the rate shed 1 basis point.

In the US midterms, Republicans headed for control of the House by smaller margins than forecast while the race for Senate continued. That belied investors’ expectation of a GOP wave and a consequent Congress gridlock seen as positive for risk sentiment. Both the S&P 500 and Nasdaq 100 tumbled more than 2% on Wednesday.

The disappointment echoed in Asia and Europe Thursday. A gauge of Chinese technology stocks in Hong Kong lost more than 3%, with heavyweights Tencent Holdings Ltd. and Alibaba Group Holding Ltd. sliding ahead of their earnings next week. Mainland Chinese stocks also declined as the nation tightened Covid restrictions on some of its biggest cities, killing of expectations for a relaxation in its pandemic policy. The Stoxx 600 index was dragged by real estate, retail and technology sectors.

China’s Covid struggles also weighed on the demand outlook for oil, sending West Texas Intermediate crude futures slipping toward the $85-per-barrel mark.

This week’s brutal selloff in cryptocurrencies eased even though sentiment remained impaired as FTX.com stared at the possibility of a bankruptcy if a $8 billion rescue doesn’t come through. Bitcoin traded above $16,700.

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

Stocks

• The Stoxx Europe 600 fell 0.1% as of 8:39 a.m. London time
• Futures on the S&P 500 rose 0.3%
• Futures on the Nasdaq 100 rose 0.4%
• Futures on the Dow Jones Industrial Average rose 0.3%
• The MSCI Asia Pacific Index fell 1.2%
• The MSCI Emerging Markets Index fell 1.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.2% to $0.9995
• The Japanese yen rose 0.2% to 146.25 per dollar
• The offshore yuan rose 0.3% to 7.2559 per dollar
• The British pound rose 0.3% to $1.1394

Cryptocurrencies

• Bitcoin rose 6.2% to $16,714.32
• Ether rose 8.1% to $1,195.51

Bonds

• The yield on 10-year Treasuries was little changed at 4.09%
• Germany’s 10-year yield was little changed at 2.17%
• Britain’s 10-year yield advanced one basis point to 3.47%

Commodities

• Brent crude fell 0.1% to $92.53 a barrel
• Spot gold rose 0.1% to $1 708.89 an ounce