(Bloomberg) — Stocks and bonds steadied with many investors clinging to sidelines ahead of a key US inflation report. Oil prices fell.
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US equity futures posted modest gains while Europe’s Stoxx 600 index erased a loss to trade little changed. Brent traded lower near $77 a barrel, reversing an earlier gain following more attacks on vessels in the Red Sea that could upset both oil supplies and trade flows.
Investor focus is on Thursday’s US inflation figures as the market seeks clues on the timing of Federal Reserve interest-rate cuts. The cooling in headline inflation is set to reverse in the December data, according to Bloomberg Economics. The impact of disrupted supply chains is keeping risks elevated and could disappoint investors expecting the Fed will pivot to rate cuts as soon as March, warned Justin Onuekwusi, chief investment officer at St James’s Place Management.
“These days we have all become obsessed with the next data print given their impact on how rate cuts are being priced,” Onuekwusi said. “What I’d look for is whether there are any signs of supply constraints coming back into the market because of geopolitical risks in the Mideast and the shipping traffic in the Red Sea not flowing like it used to.”
Treasury 10-year yields and the dollar were steady as investors braced for a wave of new government bond supply that will total $2.1 trillion over the next several weeks, according to estimates from Bloomberg Intelligence. On Tuesday, banks, companies and public-sector borrowers in Europe brought a record of more than €45.7 billion ($50 billion) of new debt to market.
Read more: A $2 Trillion Pile of New Debt Poses a Threat to Rallying Bonds
In currency trading, Bitcoin steadied after a bout of volatility that was spurred by speculation the US Securities and Exchange Commission had approved spot-Bitcoin exchange traded funds. The SEC said in a statement that it hadn’t yet given a green light for the ETFs, and said a conflicting post minutes earlier on the regulator’s official X account was untrue.
The yen extended its weakness against the dollar as a sharp slowdown in Japanese worker wage growth was seen limiting the Bank of Japan’s ability to exit its ultra-loose policy stance.
Japan’s Topix index closed at its highest since March 1990, supported by the weaker yen and falling bond yields. The Nikkei 225 index jumped 2% after reaching that milestone on Tuesday.
China’s inflation, trade and credit reports are also due in the coming days, and will offer a health check on the world’s no. 2 economy. Geopolitics remained in focus, as China’s US envoy said the country had no room to compromise with those advocating for Taiwan independence.
Elsewhere, oil rose on signs that US crude stockpiles are continuing to drop, and as more attacks on vessels in the Red Sea raised the risk that Middle East supply could be disrupted.
Key events this week:
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US wholesale inventories, Wednesday
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The World Economic Forum’s global risks report is released, Wednesday
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New York Fed President John Williams speaks, Wednesday
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US CPI, initial jobless claims, Thursday
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China CPI, PPI, trade, Friday
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UK industrial production, Friday
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US PPI, Friday
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Some of the biggest US banks report fourth-quarter results, Friday
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Minneapolis Fed President Neel Kashkari speaks, Friday
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ECB chief economist Philip Lane speaks, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 was little changed as of 9:37 a.m. London time
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S&P 500 futures rose 0.2%
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Nasdaq 100 futures rose 0.4%
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index was little changed
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The MSCI Emerging Markets Index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro rose 0.2% to $1.0950
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The Japanese yen fell 0.3% to 144.92 per dollar
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The offshore yuan was little changed at 7.1800 per dollar
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The British pound rose 0.1% to $1.2728
Cryptocurrencies
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Bitcoin rose 0.4% to $45,630.86
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Ether rose 4.6% to $2,424.55
Bonds
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The yield on 10-year Treasuries declined two basis points to 3.99%
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Germany’s 10-year yield declined two basis points to 2.16%
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Britain’s 10-year yield declined two basis points to 3.76%
Commodities
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Brent crude fell 0.3% to $77.32 a barrel
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Spot gold rose 0.2% to $2,034.88 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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