European Futures Steady as Traders Await US CPI: Markets Wrap

(Bloomberg) — European futures were steady with the dollar holding onto its gains, as traders awaited US inflation data due this week for clues on the size of the Federal Reserve’s coming interest-rate cut.

A key Asian equity index was little changed, while shares in mainland China and South Korea declined. Tokyo and Sydney notched modest gains following a positive session in US equities that was fueled by renewed dip-buying. US futures dipped slightly. Benchmark Treasuries yields also ticked lower, while the dollar advanced to extend gains for a third session. 

The fluctuations in the market reflect investors’ caution as they look to balance US recession fears and the likelihood of a soft landing. Political uncertainties playing out in the backdrop will be on display when former President Donald Trump squares off in a debate with US Vice President Kamala Harris later Tuesday. 

“Markets are questioning whether the Fed can still go for a jumbo rate cut next week, and that is helping the US dollar to claw back some gains,” said Charu Chanana, head of FX strategy at Saxo Markets in Singapore. “This week, focus also moves away from the economic trajectory towards US elections and that is likely aiding the US dollar as well.”

 

Global equities were net sold for the eighth straight week led by North America, according to Goldman Sachs Group Inc.’s prime brokerage desk report for the week ended Sept. 6. The move is a continuation of a trend that, broadly speaking, started in May as funds began a big unwind of their positions in order to get more cash readily on hand for possible dislocations around the US presidential election.

“Slowdowns do not necessarily portend recessions, nor are stock market corrections necessarily the harbinger of bear markets,” said Konstantinos Venetis at TS Lombard. “But the mix of rising macro (growth) and political (US election) uncertainty increasingly puts the burden of proof on the bulls in the near term.”

On Wednesday, a US government report is expected to show the consumer price index rose 2.6% in August from a year earlier, according to the median forecast of economists surveyed by Bloomberg. That would be the smallest increase since 2021. There will be little new guidance from Fed officials, who are in the traditional blackout period ahead of the Sept. 17-18 meeting.

“Inflation matters,” said Chris Low at FHN Financial. “Weaker numbers might encourage the Fed toward a 50 basis-point cut, while anything higher could lock in 25 basis points.”

In Asia, the CSI 300 Index, China’s equity benchmark, approached its lowest close since January 2019 on deepening concerns about the country’s economic weakness, adding further pressure on policymakers for additional support measures. 

Shares of some Chinese biotech companies such as Wuxi AppTec were down after the US House passed a bill that would blacklist some firms deemed foreign adversaries. 

Alibaba’s stock rose as much as 5.2% Hong Kong — the most since Aug. 16, with some 147.92 million shares traded — after joining the Stock Connect program that gives mainland investors easier access to investing in the Chinese tech giant. 

But a Bloomberg index tracking Chinese real estate stocks sank by as much as 5.3%, the biggest intraday decline since May, after some property companies were removed from the program. Some bonds sold by Chinese developers, including China Vanke Co., also fell as investors digest sluggish home sales data recently released.  

Meanwhile, China’s August exports in dollar terms rose 8.7% on-year, according to the Customs General Administration PRC. That beat estimates of 6.6%. The country also posted robust imports of commodities in August as industries prepared for the peak consumption period that begins in the fall. Imports overall expanded just 0.5%, leaving a trade surplus of $91 billion for the month. 

Iron ore also will be closely watched on Tuesday, as it sank below $90 a ton in the previous session for the first time since 2022 before closing 1.1% higher. Industrial commodities are facing sustained pressure from tepid Chinese demand and gathering worries over global growth. 

The S&P 500 rose 1.2% after its worst start to the month on record, according to Bespoke Investment Group data going back to 1953. Nvidia Corp. and Tesla Inc. led gains in megacaps. 

Oil inched down after a one-day gain driven by the return of a risk-on tone to wider markets. Gold retreated after a small advance as traders look ahead to the US inflation data. Bitcoin fell below $57,000. Aluminum extended its rebound on a decline in Chinese inventories and an unexpected pickup in overall exports from the top metal consumer.

Key events this week:

• Germany CPI, Tuesday
• US presidential debate between Donald Trump and Kamala Harris, Tuesday
• US CPI, Wednesday
• Japan PPI, Thursday
• ECB rate decision, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone industrial production, Friday
• Japan industrial production, Friday
• U. Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 2:30 p.m. Tokyo time
• Nasdaq 100 futures fell 0.3%
• Japan’s Topix rose 0.4%
• Australia’s S&P/ASX 200 rose 0.4%
• Hong Kong’s Hang Seng rose 0.4%
• The Shanghai Composite fell 0.3%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1041
• The Japanese yen was little changed at 143.14 per dollar
• The offshore yuan was little changed at 7.1225 per dollar

Cryptocurrencies

• Bitcoin fell 0.2% to $56,886.51
• Ether rose 0.1% to $2,344.9

Bonds

• The yield on 10-year Treasuries was little changed at 3.71%
• Japan’s 10-year yield was little changed at 0.885%
• Australia’s 10-year yield declined four basis points to 3.92%

Commodities

• West Texas Intermediate crude fell 0.2% to $68.54 a barrel
• Spot gold fell 0.1% to $2,503.27 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott.

©2024 Bloomberg L.P.