(Bloomberg) — European stocks and American equity futures struggled for direction as markets head into a crunch period, with key inflation data in the US on Wednesday followed by interest-rate decisions on both sides of the Atlantic.
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The Stoxx Europe 600 index were little changed. AstraZeneca Plc plunged more than 5% after a trial of its lung cancer drug showed mixed results. US futures dipped slightly after the S&P 500 rose 1.2% on Monday, rebounding from its worst start to the month in data going back to 1953. Benchmark Treasury yields ticked higher, while the dollar held Monday’s gains.
The market mood is cautious as investors look to balance US recession fears and the likelihood of a soft landing, amid worries the Fed may be falling behind the curve as the labor market cools. Meanwhile, US political risk is back at the forefront, with former President Donald Trump squaring off in a debate with US Vice President Kamala Harris later Tuesday.
“It may take some time before we can tell for certain that the Fed successfully stemmed the slowdown and avoided a recession or if it acted too late and the economy is destined to fall into contraction,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Co. “Given this uncertainty, we believe investors would be well served by being mindful of taking on outsized risks.”
Global equities were net sold for the eighth straight week led by North America, according to Goldman Sachs Group Inc.’s prime brokerage desk report for the week ended Sept. 6. The move is a continuation of a trend that, broadly speaking, started in May as funds began a big unwind of their positions in order to get more cash readily on hand for possible dislocations around the US presidential election.
A three-month measure of implied volatility for a key Bloomberg dollar gauge is near its highest mark since the March 2023 banking crisis. Equities’ so-called fear gauge is once again on the upswing after surging amid the market tumult of early August.
“The mix of rising macro (growth) and political (US election) uncertainty increasingly puts the burden of proof on the bulls in the near term,” said Konstantinos Venetis at TS Lombard.
On Wednesday, a US government report is expected to show the consumer price index rose 2.6% in August from a year earlier, according to the median forecast of economists surveyed by Bloomberg. That would be the smallest increase since 2021. There will be little new guidance from Fed officials, who are in the traditional blackout period ahead of the Sept. 17-18 meeting.
“Inflation matters,” said Chris Low at FHN Financial. “Weaker numbers might encourage the Fed toward a 50 basis-point cut, while anything higher could lock in 25 basis points.”
A key Asian equity index was little changed, while shares in mainland China and South Korea declined. Tokyo and Sydney notched modest gains following a positive session in US equities that was fueled by renewed dip-buying.
Oil inched down after a one-day gain driven by the return of a risk-on tone to wider markets. Gold retreated after a small advance as traders look ahead to the US inflation data. Bitcoin fell below $57,000. Aluminum extended its rebound on a decline in Chinese inventories and an unexpected pickup in overall exports from the top metal consumer.
Key events this week:
Germany CPI, Tuesday
US presidential debate between Donald Trump and Kamala Harris, Tuesday
US CPI, Wednesday
Japan PPI, Thursday
ECB rate decision, Thursday
US initial jobless claims, PPI, Thursday
Eurozone industrial production, Friday
Japan industrial production, Friday
U. Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 8:17 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.2%
The MSCI Emerging Markets Index rose 0.1%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1043
The Japanese yen fell 0.2% to 143.48 per dollar
The offshore yuan was little changed at 7.1268 per dollar
The British pound rose 0.2% to $1.3100
Cryptocurrencies
Bitcoin fell 0.2% to $56,892.78
Ether rose 0.2% to $2,346.25
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.72%
Germany’s 10-year yield advanced one basis point to 2.18%
Britain’s 10-year yield advanced three basis points to 3.88%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott and Michael Msika.
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