(Bloomberg) — U.S. stock futures were in a tight range ahead of the release of a consumer price index that could decide whether the Federal Reserve should start cutting interest rates next month.
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Europe’s Stoxx 600 index rose 0.4%, lifted after UBS Group AG reported better-than-expected second-quarter profit. Mining shares fell as iron ore fell to its lowest since May 2023 on concerns over Chinese demand. U.S. stocks were steady after Wall Street’s gains on Tuesday, boosted by a weaker-than-expected U.S. producer price index.
Easing price pressures in the U.S. are boosting confidence that officials can start to lower borrowing costs and refocus on supporting the labor market. Forecasters expect both the consumer price index and the core index excluding food and energy to rise modestly by 0.2%, the latter’s smallest three-month increase since the start of 2021.
“Inflation is no longer an issue for the Fed and we believe they can cut rates,” said Lillian Chauvin, head of asset allocation at Coutts. “Growth is slowing after very strong growth in the first half of the year, but that’s what the Fed wanted and they’re on track to get there, so this is very positive news for market participants.”
The pound fell against the dollar after British inflation data came in weaker than expected. Consumer prices rose 2.2% in July after rising 2% for the previous two months. Economists had expected 2.3%. Traders are fully pricing in another half-point rate cut by the Bank of England by the end of the year, the first time since Aug. 5.
British government bonds surged after the inflation report, while U.S. Treasuries were little changed after a broad gain in the previous trading day. The Bloomberg Dollar Index fell, trading near a four-month low.
In commodity markets, crude oil rebounded from Tuesday’s decline and rose after industry reports showed a big drop in U.S. crude stockpiles and rising tensions in the Middle East. Gold also rose.
The weakness in iron ore deepened as the world’s largest steelmaker warned that China’s steel industry faces a crisis worse than the 2008 and 2015 recessions, likening the situation to a “hard winter.”
The latest rally on Wall Street has brought the S&P 500 closer to a key technical level, helping the index post its biggest four-day gain this year.
“It was a strong earnings season in the US and a decent one in Europe,” Coutts’ Chauvin said. “Analyst revisions have turned positive in most regions, which should support equity markets going forward.”
In Asia, the region’s stock indexes rose for a fourth straight session, further recovering from last week’s selloff. New Zealand’s 10-year government bond yields fell after the central bank cut interest rates by 25 basis points, entering an easing cycle much earlier than previously expected. The New Zealand dollar fell more than 1 percent, but domestic stocks rose.
The yen and Japanese stocks fluctuated as traders digested news that Prime Minister Fumio Kishida will not run for a second term as president of the long-ruling Liberal Democratic Party in September.
Major events this week:
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U.S. Consumer Price Index, Wednesday
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China home prices, retail sales, industrial production on Thursday
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U.S. initial jobless claims, retail sales, industrial production Thursday
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Federal Reserve Bankers Alberto Mussallem and Patrick Harker to speak Thursday
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U.S. housing starts, University of Michigan consumer confidence, Friday
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Fed President Austin Goolsby to speak Friday
Some of the key market developments:
stock
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The Stoxx Europe 600 index was up 0.4% as of 10:07 a.m. London time.
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S&P 500 futures little changed
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Nasdaq 100 futures fell 0.1%
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Dow Jones Industrial Average futures up 0.1%
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MSCI Asia Pacific Index rose 0.7%
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MSCI Emerging Markets Index rose 0.6%
currency
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The Bloomberg Dollar Spot Index fell 0.1%.
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The euro rose 0.3% to $1.1022.
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The Japanese yen weakened 0.2% to 147.10 yen per dollar.
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The offshore yuan was little changed at 7.1464 yuan per dollar.
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The British pound fell 0.1% to $1.2843.
Cryptocurrency
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Bitcoin rose 0.6% to $60,976.86.
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Ether rose 1.1% to $2,729.8.
Bonds
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The yield on the 10-year Treasury note was little changed at 3.85%.
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German 10-year government bond yields rose 2 basis points to 2.20%.
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UK 10-year government bond yields fell 4 basis points to 3.85%.
merchandise
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Brent crude rose 0.8% to $81.31 a barrel
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Spot gold rose 0.4% to $2,474.40 an ounce.
This story was produced with assistance from Bloomberg Automation.
–With assistance from Michael Msika and Chiranjivi Chakraborty.
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