US Stock Futures Dip as Investors Await Fed’s Inflation Data, Bitcoin Surges
Investors in the US stock market are on edge as they await the release of the Federal Reserve’s key inflation metric, which will provide insight into the future of interest rates. Meanwhile, Bitcoin continues its impressive rally, surpassing the $63,000 mark.
Stock Market Retreats
Contracts for the S&P 500 and the Nasdaq 100 have both retreated by about 0.3%, signaling a cautious sentiment among investors. In Europe, however, stocks have edged higher, with luxury company Moncler SpA experiencing a rally after beating profit expectations. On the other hand, Air France-KLM reported a fourth-quarter loss, leading to a slump in its stock value. Anheuser-Busch InBev also slipped after missing profit estimates.
Focus on Inflation Data
Traders are eagerly awaiting the release of the US core personal consumption expenditure (PCE) gauge data, which is expected to shed light on the challenges the Federal Reserve faces in achieving its 2% inflation target. This data will likely validate recent statements from central bank officials indicating that there is no rush to ease monetary policy. The PCE reading will provide crucial insights into the path forward for interest rates.
Asian Equities Rebound
In Asia, there has been a rebound in Chinese shares, leading to a rise in the region’s equities gauge. The yen has also experienced significant gains against the dollar, following comments from Bank of Japan Board Member Hajime Takata suggesting that there is growing momentum to end the negative interest rate policy.
Bitcoin’s Impressive Rally
Bitcoin’s rally shows no signs of slowing down, as it surged above $60,000 for the first time in over two years. This surge is attributed to new demand from exchange-traded funds. The cryptocurrency almost reached $64,000, with its 2021 record high just below $69,000. This impressive performance has caught the attention of investors worldwide.
Treasury Yields and Fed’s Stance
After a rally in bonds on Wednesday, Treasury yields have ticked higher. The 10-year yield fell four basis points, while the two-year slipped six basis points. New York Fed President John Williams emphasized that the central bank still has a long way to go in its battle against inflation, while Atlanta Fed Chief Raphael Bostic urged patience regarding policy tweaks.
Market Expectations
Traders are currently pricing in around 80 basis points of easing by year-end, which aligns with what officials indicated in December. This would mean three cuts in 2024, as the Fed historically makes 25 basis point increments. It is worth noting that at the beginning of February, swaps were projecting almost 150 basis points of cuts for this year.
Dollar Weakens, Yen Climbs
The dollar has weakened, with the yen climbing against the greenback. Investors are positioning themselves for a likely narrowing of the interest rate gap between Japan and the US. Fitch Ratings Director Jessica Hinds expects the Bank of Japan to take advantage of the reflationary environment to exit negative rates, but she believes that the policy stance will remain accommodative through 2025.
Looking Ahead
Investors will be closely monitoring key events this week, including Germany’s CPI and unemployment data, US consumer income and PCE deflator, China’s official PMI and Caixin manufacturing PMI, Eurozone’s S&P Global Manufacturing PMI, CPI, and unemployment data, as well as various speeches from central bank officials.
Market Movements
As of 8:21 a.m. London time:
– The Stoxx Europe 600 rose 0.2%
– S&P 500 futures fell 0.3%
– Nasdaq 100 futures fell 0.3%
– Futures on the Dow Jones Industrial Average fell 0.2%
– The MSCI Asia Pacific Index rose 0.4%
– The MSCI Emerging Markets Index rose 0.1%
Currency and Cryptocurrency Updates
The Bloomberg Dollar Spot Index fell 0.2%, while the euro remained relatively unchanged at $1.0846. The Japanese yen experienced a 0.7% rise against the dollar, reaching 149.65 per dollar. The offshore yuan and the British pound remained relatively stable.
In the cryptocurrency market, Bitcoin rose 4% to $62,973.92, while Ether rose 5.1% to $3,491.46.
Bond Yields and Commodities
The yield on 10-year Treasuries advanced one basis point to 4.27%. Germany’s 10-year yield remained unchanged at 2.46%, while Britain’s 10-year yield declined one basis point to 4.17%.
In the commodities market, there were no significant changes reported.
Conclusion
Investors are eagerly awaiting the release of the Federal Reserve’s inflation data, which will provide crucial insights into the
