(Bloomberg) -- US futures drifted as investors awaited the latest batch of economic data amid expectations of large interest rate hikes by the Federal Reserve. Treasury yields rose and the dollar was steady.
Contracts on the S&P 500 and Nasdaq 100 fluctuated between small gains and losses after the underlying gauges posted modest rallies on Wednesday. European stocks edged higher, while the MSCI Asia Pacific Index reversed earlier gains to trade lower. In Europe, banks led the advance while utilities extended declines.
Traders remain focused on US economic data, with a decline in producer prices there providing some relief after Tuesday’s consumer inflation jolt saw wagers for rate increases ratchet higher and stocks slump the most in two years. Jobs, manufacturing and retail numbers later Thursday will be parsed for clues on the strength of the economy and inflation expectations.
“While the Fed is now almost certain to hike by 75 basis points next week and more in the months that follow than previously anticipated, the view still seems to be that Tuesday was a setback rather than a game changer,” said Craig Erlam, a senior markets analyst at Oanda Europe Ltd. “Confidence that we are at or near peak inflation is dented but not broken and this week serves as a reminder that as was the case on the way up, the path back to 2% will likely be littered with nasty surprises.”
Swaps traders are pricing in a 75 basis point hike when the Fed meets next week, with some wagers appearing for a full-point move. The continued rise in rate-sensitive Treasuries deepened the curve inversion -- a harbinger for a looming recession -- to a level unseen this century.
The banking sector, which falls into the so-called value category, is emerging as an inflation winner, showing the best performance among industry groups in Europe this month. Meanwhile, the UK is considering scrapping a cap on banker bonuses.
Asian currencies remained at risk from a strong greenback. The yen weakened on Thursday to trade around 143.6 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.
Oil fluctuated as traders grappled with concerns about global demand and assessed comments from the US on refilling strategic reserves. Natural gas increased as traders assessed Europe’s steps to contain the energy crisis, with governments making plans to shut down power in some places to avoid a total collapse of the system this winter. Gold fell.
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Here are some key events to watch this week:
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US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
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China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
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Euro area CPI, Friday
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US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.2% as of 9:41 a.m. London time
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Futures on the S&P 500 were little changed
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Futures on the Nasdaq 100 were little changed
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index fell 0.3%
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The MSCI Emerging Markets Index fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro rose 0.1% to $0.9992
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The Japanese yen fell 0.3% to 143.55 per dollar
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The offshore yuan fell 0.2% to 6.9881 per dollar
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The British pound was little changed at $1.1530
Bonds
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The yield on 10-year Treasuries advanced four basis points to 3.45%
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Germany’s 10-year yield advanced four basis points to 1.76%
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Britain’s 10-year yield advanced four basis points to 3.17%
Commodities
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Brent crude fell 0.6% to $93.51 a barrel
- Spot gold fell 0.6% to $1,687.88 an ounce