Stocks, US Futures Are Steady as Traders Await CPI: Markets Wrap

(Bloomberg) — US index futures and European equities were steady amid forecasts inflation in the world’s largest economy will post the lowest figure this year, warranting a less hawkish Federal Reserve.

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Contracts on the S&P 500 and Nasdaq 100 rose less than 0.1% after the underlying indexes climbed on Monday by the most in December. The Stoxx 600 gauge was little changed. The dollar weakened for the first time in three days. Treasuries gained, diverging from European bonds that fell. Oil rallied on signs of further easing in China’s Covid rules.

US stocks advanced Monday as traders took comfort from economists’ projection for a 7.3% expansion in the US consumer price index for November. If that expectation comes true, it would be the lowest reading in 11 months and the fifth consecutive drop. While that would still leave inflation much higher than the Fed’s target of 2%, it could justify a slowdown in the pace of monetary tightening, with a projected half-point move on Wednesday. However, it also leaves the bar low for disappointment and a selloff.

“Today’s US CPI data will give us an idea on how the market pricing for the Fed’s terminal rate will clash with the dot plot projections that will come out tomorrow, and that will, in all cases, hammer any potentially optimistic market sentiment,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “Therefore, even if we see a great CPI print and a nice market rally today, it may not extend past the Fed decision on Wednesday.”

The European equity benchmark steadied from Monday’s losses as traders awaited the US release but were also mindful of the European Central Bank’s rate decision due Thursday. The continent’s policymakers are expected to follow the Fed with their own half-point hike. Meanwhile, data showed that UK wages are rising at close to a record pace, maintaining pressure on the Bank of England to keep hiking interest rates despite a worsening economic outlook.

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