(Bloomberg) — European stocks rebounded after days of political upheaval in France, with traders positioning for the potential disruption from US inflation data landing just hours ahead of Federal Reserve’s interest rate decision.
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Banks led a 0.5% advance in the Stoxx 600, ending three sessions of losses. The euro held steady. Treasuries were little changed after rising on a solid $39 billion sale, while French 10-year bonds snapped four days of losses.
The dollar stood firm following four days of gains, while US stock futures edged higher after the S&P 500 closed at another record.
Volatility in European assets appears to be subsiding after investors were caught unprepared for the French far-right’s gains in the weekend’s European Parliament elections. The calm may be short-lived, however, with a double-whammy of US CPI data and Fed rate forecasts potentially upending markets.
“Today is a big day in terms of economic data and Fed announcement,” said Ipek Ozkardeskaya, an analyst at Swissquote Bank. “It could determine the global market mood for the rest of the month, and a good part of summer.”
The Fed is widely expected to hold borrowing costs at a two-decade high on Wednesday, but there’s less certainty on officials’ quarterly rate projections, known as the “dot plot.”
The projections “could potentially be a major market moving event especially if the dots only show one rate cut in 2024 instead of two, which seems to be the street consensus view,” said Nomura strategist Chetan Seth.
The new dot plot likely will indicate two 25-basis-point cuts this year, compared with three in the March version, according to Bloomberg Economics. The economists expect the May CPI print to give the Fed some additional reassurance that inflation is slowing.
In Asia, Hong Kong’s equity benchmark fell more than 1%.
China’s consumer price gains held above zero in May while factory-gate prices remained stuck in deflation, fueling concerns over persistently weak demand. Separately, the Biden administration is said to be considering further restrictions on China’s access to chip technology used for artificial intelligence.
Key events this week:
US CPI, Fed rate decision, Wednesday
G-7 leaders summit, June 13-15
Eurozone industrial production, Thursday
US PPI, initial jobless claims, Thursday
Tesla annual meeting, Thursday
New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday
Bank of Japan’s monetary policy decision, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.5% as of 8:31 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.1%
The MSCI Emerging Markets Index rose 0.3%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0742
The Japanese yen fell 0.1% to 157.32 per dollar
The offshore yuan was little changed at 7.2696 per dollar
The British pound was little changed at $1.2741
Cryptocurrencies
Bitcoin rose 0.1% to $67,367.45
Ether rose 1% to $3,520.96
Bonds
The yield on 10-year Treasuries was little changed at 4.40%
Germany’s 10-year yield declined two basis points to 2.60%
Britain’s 10-year yield declined two basis points to 4.24%
Commodities
Brent crude rose 0.5% to $82.37 a barrel
Spot gold fell 0.2% to $2,312.77 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and Aya Wagatsuma.
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