On Thursday, stock markets experienced a decline while bond yields inched higher, as investors braced for the release of U.S. inflation data that could influence the Federal Reserve’s future interest rate decisions. Europe’s Stoxx 600 index and S&P 500 futures both slipped approximately 0.2%, following a record-setting performance by the main U.S. equity gauge, which marked its 44th record this year. Ten-year Treasury yields remained above 4%, nearing the highest levels seen since late July, while Bloomberg’s dollar index stabilized after an eight-day streak of gains, its longest since April 2022.
Expectations surrounding U.S. consumer price data suggest that inflation has moderated, bolstering the belief that the Federal Reserve may continue to ease its monetary policy in the coming months. However, a surprisingly robust jobs report for September has prompted traders to reconsider their rate-cut projections, with many now anticipating a 25-basis-point reduction next month.
Bénédicte Lowe, a strategist at BNP Paribas Markets 360, commented on Bloomberg TV that a strong inflation reading could alter the Fed’s reaction function. “Given that equities are near all-time highs in the U.S. and close to multi-year highs in Europe, the risks are more skewed to the downside if we see a pickup in inflation from here,” Lowe stated.
Minutes from the Fed’s September meeting revealed that most rate-setters supported a 50-basis-point cut, although some officials advocated for a more gradual approach.
This week also marks the beginning of the third-quarter earnings season, and investors are keen to assess whether company profits are strong enough to maintain the S&P 500’s approximately 20% rally seen this year. Companies in the index are projected to report a 4.7% increase in quarterly earnings compared to the same period last year, a decrease from the 7.9% growth projected on July 12.
Delta Air Lines Inc. is scheduled to report earnings later Thursday, while JPMorgan Chase & Co. and Wells Fargo & Co. will follow on Friday.
In individual stock movements, 10X Genomics Inc. saw a significant drop of up to 24% after reporting preliminary revenue figures that fell short of expectations. Conversely, GXO Logistics Inc. experienced gains following news of a potential sale.
In Europe, GSK Plc shares rose after the company announced plans to pay up to $2.2 billion to settle U.S. court cases related to its Zantac medication. Deutsche Telekom AG also saw its stock rise following the announcement of a share buyback program.
Earlier in the day, Chinese stocks gained as investors awaited a Saturday press conference by the finance ministry for potential clues regarding fiscal stimulus. Meanwhile, commodity markets exhibited a generally weaker trend, though oil prices strengthened above $77 a barrel amid concerns that Israeli retaliation against Iran following recent missile strikes could escalate into a broader conflict in the Middle East.
Key Events This Week:
Thursday: U.S. CPI, initial jobless claims; speeches by Fed’s John Williams and Thomas Barkin.
Friday: Earnings reports from JPMorgan and Wells Fargo; U.S. PPI and University of Michigan consumer sentiment; speeches by Fed officials Lorie Logan, Austan Goolsbee, and Michelle Bowman.
Market Overview:
Stocks
- The Stoxx Europe 600 fell 0.2% as of 9:45 a.m. London time.
- S&P 500 futures fell 0.2%.
- Nasdaq 100 futures fell 0.2%.
- Futures on the Dow Jones Industrial Average fell 0.1%.
- The MSCI Asia Pacific Index rose 0.6%.
- The MSCI Emerging Markets Index rose 0.6%.
Currencies
- The Bloomberg Dollar Spot Index was little changed.
- The euro was stable at $1.0935.
- The Japanese yen rose 0.1% to 149.11 per dollar.
- The offshore yuan was little changed at 7.0910 per dollar.
- The British pound remained stable at $1.3075.
Cryptocurrencies
- Bitcoin rose 0.8% to $60,857.15.
- Ether increased by 1.5% to $2,388.87.
Bonds
- The yield on 10-year Treasuries was little changed at 4.08%.
- Germany’s 10-year yield advanced two basis points to 2.27%.
- Britain’s 10-year yield rose three basis points to 4.22%.
Commodities
- Brent crude rose 0.7% to $77.15 a barrel.
- Spot gold increased by 0.3% to $2,615.76 an ounce.
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