(Bloomberg) -- US equity futures climbed and Treasuries extended declines as investors assessed developments in the debate over how much central bank monetary policy tightening is needed to fight inflation.
Contracts on the S&P 500 and Nasdaq 100 rose about 0.5% after some wavering in early trading. The latest drop in Treasuries pushed 10-year yields closer to 2.9% as traders raised bets on Federal Reserve interest-rate hikes. The dollar pared an advance against major peers.
Oil rose as investors assessed the future of OPEC+ unity, just as ministers from the group prepare to meet on Thursday to discuss its supply policy for July. Crude advanced about 10% in May, stoking more inflation worries.
Concerns that central-bank rate hikes may induce a recession are keeping investors guessing about the outlook for the economy as rising food and energy costs squeeze consumers, and volatility has picked up.
“US markets, and by default, global markets, will still indulge in schizophrenic swings in market sentiment as the FOMO dip-buyers become increasingly frantic in their attempts to pick a cyclical low in equity markets,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte.
Europe’s Stoxx 600 Index pared back declines in the wake of euro-zone figures Tuesday that showed a record jump in consumer prices. The data strengthen the case for the European Central Bank to lift interest rates by a half-point in July, according to Austrian central bank chief and Governing Council member Robert Holzmann.
“There are heightened concerns around inflation and where central banks are likely to go trying to combat inflation,” Kristina Hooper, Invesco Advisers chief global markets strategist, said on Bloomberg Radio. “This has gone from just an inflation scare to a growth scare. Uncertainty has grown.”
Citigroup Inc. strategists said that after a difficult first five months of 2022, the pain may not be over yet for global equity markets. The prospect of downward revisions to earnings estimates is the latest headwind to face stock investors, already rattled by runaway inflation and the potential impact of central-bank tightening aimed at controlling it, the strategists led by Jamie Fahy wrote in a note.
In US premarket trading Wednesday, Salesforce Inc. climbed after the cloud-based customer management software company raised its annual profit forecast. ChargePoint Holdings Inc. slipped as analysts noted that the EV charging network firm’s margins came under pressure due to rising costs and supply-chain disruption. Delta Air Lines Inc. gained after raising its revenue outlook.
How will markets be affected by the Fed’s quantitative tightening? QT officially starts Wednesday and is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.
Here are some key events to watch this week:
- The Federal Reserve is set to start shrinking its $8.9 trillion balance sheet Wednesday
- The Fed releases its Beige Book report on regional economic conditions Wednesday
- New York Fed President John Williams, St. Louis Fed President James Bullard speak at separate events Wednesday
- OPEC+ virtual meeting Wednesday
- Cleveland Fed President Loretta Mester discusses the economic outlook Thursday
- US May employment report Friday
- The UN’s Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.5% as of 8:39 a.m. New York time
- Futures on the Nasdaq 100 rose 0.5%
- Futures on the Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.0723
- The British pound was little changed at $1.2592
- The Japanese yen fell 0.6% to 129.41 per dollar
Bonds
- The yield on 10-year Treasuries advanced three basis points to 2.87%
- Germany’s 10-year yield advanced two basis points to 1.14%
- Britain’s 10-year yield advanced two basis points to 2.12%
Commodities
- West Texas Intermediate crude rose 1.7% to $116.62 a barrel
- Gold futures fell 0.4% to $1,840.80 an ounce
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