Stocks Advance With All Eyes on US Inflation Data: Markets Wrap

(Bloomberg) — European stocks rose and US futures kept to tight ranges before an American consumer price report that could determine whether the Federal Reserve will start cutting interest rates next month.

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The Stoxx 600 Index was 0.4% higher, supported by UBS Group AG, which rose after the bank’s second-quarter profit beat estimates. Miners dropped as iron ore slumped to the lowest since May 2023 amid worries over demand in China, with Rio Tinto Group sliding more than 2%.

US equity contracts were steady following Tuesday’s rally in the S&P 500, fueled by cooler-than-forecast US producer price data. The MSCI benchmark for Asian stocks climbed for a fourth session to recover further from last week’s rout.

The easing of price pressures in the US has bolstered confidence that officials can start lowering borrowing costs and refocus on supporting the labor market. Forecasters expect a modest 0.2% increase in both the consumer price index and the core gauge excluding food and energy — which would mark the smallest three-month increase for the latter since early 2021.

“We think inflation is no longer going to be an issue for the Fed and they will able to cut,” said Lilian Chovin, head of asset allocation at Coutts. “Growth is shifting down a gear after a very strong first half of the year, but that’s what the Fed wanted, and they’re about to achieve it. That is very positive news for market participants.”

The pound fell against the dollar after UK inflation data came in below forecasts. The Consumer Prices Index rose 2.2% in July after a 2% gain in each of the two previous months. Economists had expected a reading of 2.3%. Traders fully priced a half-point of further Bank of England rate cuts by year-end for the first time since Aug. 5.

UK government bonds jumped following the inflation print, while Treasuries were little changed after rising across the curve in the previous session. A Bloomberg gauge of the dollar steadied around a four-month low.

In commodities, oil rose, rebounding from losses on Tuesday, as an industry report pointed to a sizable drop in US crude stockpiles and tensions simmered in the Middle East. The weakness in iron ore deepened after the world’s biggest steel producer warned that China’s steel industry is facing a crisis more serious than the downturns of 2008 and 2015, likening conditions to a “severe winter.”

The latest gains on Wall Street have pushed the S&P 500 closer to a key technical level, with the index just notching its biggest four-day rally this year.

“Earnings season has been quite good in the US and decent in Europe,” said Chovin at Coutts. “Revisions from analysts are turning positive across most regions which should support equities going forward.”

New Zealand’s 10-year benchmark bond yields slumped as the central bank cut rates by 25 basis points, embarking on an easing cycle much sooner than previously indicated. The kiwi fell over 1% while local stocks rallied.

In Japan, the yen and stocks fluctuated as traders digested news that Prime Minister Fumio Kishida won’t run for a second term as leader of the long-ruling Liberal Democratic Party in September.

Key events this week:

Eurozone GDP, industrial production, Wednesday
US CPI, Wednesday
China home prices, retail sales, industrial production, Thursday
US initial jobless claims, retail sales, industrial production, Thursday
Fed’s Alberto Musalem and Patrick Harker speak, Thursday
US housing starts, University of Michigan consumer sentiment, Friday
Fed’s Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.4% as of 9:41 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.1%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.7%
The MSCI Emerging Markets Index rose 0.5%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2% to $1.1010
The Japanese yen fell 0.3% to 147.26 per dollar
The offshore yuan was little changed at 7.1478 per dollar
The British pound fell 0.2% to $1.2836

Cryptocurrencies

Bitcoin rose 0.5% to $60,910.12
Ether rose 1.2% to $2,730.76

Bonds

The yield on 10-year Treasuries advanced one basis point to 3.85%
Germany’s 10-year yield advanced two basis points to 2.20%
Britain’s 10-year yield declined three basis points to 3.86%

Commodities

Brent crude rose 0.4% to $81.05 a barrel
Spot gold rose 0.4% to $2,474.77 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Michael Msika and Chiranjivi Chakraborty.