US futures calm ahead of Fed-favored inflation gauge: markets wrap

(Bloomberg) — US stock futures were steady and European stocks rose as traders waited for a Federal Reserve-preferred inflation gauge as a measure of underlying price pressures. The dollar strengthened.

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An indicator for global equities is heading for a second straight quarterly gain, underscoring investor optimism amid banking turmoil and elevated interest rates.

Contracts on the S&P 500 edged higher, while those on the tech-heavy Nasdaq 100 were little changed, with the underlying index set for its strongest March since 2010. Digital World Acquisition Corp., the blank check firm that is taking Donald Trump’s media company public, rallied in premarket trading after becoming the first former president to be impeached. Other Trump-related stocks also gained. Consumer goods stocks led gains in the Stoxx Europe 600 Index.

Technology stocks have led the world this quarter, up 19%, the highest since mid-2020. The bullish tone was on display this week as the S&P 500 rose 0.6% on Thursday for its third rise in four days. gained weight

As for the interest rate outlook, all eyes are on Friday’s so-called PCE Core Deflator, which should show that high inflation has persisted over the past month. A round of speakers from the Fed on Thursday suggested further monetary tightening was needed to contain inflation, even after three US banks collapsed this month.

When stocks “end the week in the green, that’s a big deal considering how near-disastrous the rest of the month was,” said Craig Erlam, senior market analyst at Oanda. “Confidence is easy to shake and hard to restore, and a positive end to the week would send a strong signal that investors are taking comfort in the absence of turmoil of late.”

The dollar pared some of its declines this month. Treasury yields stabilized at the end of a quarter of wild swings. Investors struggled to adjust to bank failures and the changing interest rate outlook amid high inflation and threats to economic growth. The two-year yield was about 4.13% on Friday, while the 10-year was about 3.55%.

Traders remained wary of any swings during the quarter-end rebalancing from pension funds and options hedging activity. And they continue to debate the extent to which policymakers could cut interest rates this year. Several strategists have said markets are wrong to expect the Fed to ease this year as the job market remains resilient, even as US jobless claims rose for the first time in three weeks.

On Thursday, Boston Fed Chair Susan Collins said tightening was needed, while Richmond Fed Chair Thomas Barkin said the Fed could hike rates more if inflation risks persist.

According to strategists at Bank of America Corp. Investors are piling into cash at the fastest pace since the pandemic, unsettled by a spate of bank runs, while seeking higher money market fund rates. In the first three months of this year, investors put $508 billion into cash, the largest quarterly inflow since the onset of Covid-19 three years ago, the strategists wrote, citing data from EPFR Global.

In the past two weeks alone, more than $100 billion has flowed into money market funds, it said.

Meanwhile, strategists at Citigroup Inc. said investor focus will shift from concerns about high interest rates to concerns about the risks of a recession, and when that happens, US stocks will look more attractive than those in Europe.

A team led by Beata Manthey upgraded US stocks to overweight from underweight on Friday, saying they are “more defensive than other markets” during earnings recessions. They expect global earnings per share to contract by 5% in 2023 and say analysts are likely to cut earnings estimates even further.

Strategists trimmed European ex-UK stocks after several months of outperformance due to their cyclical nature and underperforming the US before and during earnings recessions.

In Europe, euro-zone inflation fell at an all-time high, but a new high in underlying gains highlighted the daunting task the European Central Bank faces in deciding how far to raise interest rates. Consumer prices rose 6.9% yoy in March – up from 8.5% in February and below economists’ median estimate of 7.1%, but core inflation accelerated to 5.7%.

Elsewhere in markets, oil headed for a weekly gain on Friday as Iraqi exports continued to be disrupted. Gold has changed little. Bitcoin should end its best quarter since March 2021 with a gain of about 70%.

Important events this week:

  • US Consumer Income, PCE Deflator, University of Michigan Consumer Sentiment, Friday

  • ECB President Christine Lagarde speaks on Friday

  • New York Fed President John Williams speaks on Friday

Some of the key movements in the markets:


  • S&P 500 futures were up 0.1% at 7:56 a.m. New York time

  • Nasdaq 100 futures were little changed

  • Futures on the Dow Jones Industrial Average rose 0.2%

  • The Stoxx Europe 600 rose 0.4%

  • The MSCI World Index has hardly changed


  • The Bloomberg Dollar Spot Index rose 0.2%

  • The euro fell 0.3% to $1.0867

  • The British pound was little changed at $1.2375

  • The Japanese yen fell 0.4% to 133.20 per dollar


  • Bitcoin fell 0.7% to $27,960.02

  • Ether was little changed at $1,793.93


  • The 10-year government bond yield was little changed at 3.55%.

  • The 10-year German government bond yield fell two basis points to 2.36%

  • The 10-year UK government bond yield rose three basis points to 3.55%

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This story was created with the support of Bloomberg Automation.

–Assisted by Brett Miller.

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