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Morning Bid: Anxious wait for US inflation

Published 10/04/2024, 06:14
Updated 10/04/2024, 06:16
© Reuters. FILE PHOTO: lags fly over the Federal Reserve building on a windy day in Washington, U.S., May 26, 2017. REUTERS/Kevin Lamarque/File Photo
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A look at the day ahead in European and global markets from Vidya Ranganathan

Fretfulness and fatigue ahead of U.S. inflation numbers have benumbed markets this week, not to mention holidays in several parts of Asia.

Europe could be steeling for some volatility as investors brace for that data, following Wall Street's lacklustre performance the previous day.

U.S. stocks closed in the green on Tuesday but only barely, despite the biggest one-day fall in Treasury yields in over a month, and a notable slide in oil prices.

The highlight in Asia was ratings agency Fitch's announcement it has revised its outlook on China's sovereign credit rating to negative, citing risks to public finances as the economy faced increasing uncertainty in its shift to new growth models. China's markets barely flinched.

U.S. consumer price inflation for March due later follows a strong jobs report last Friday that blew past forecasts, raising questions on how soon and how much the Federal Reserve will cut rates this year.

Futures traders reduced bets to the lowest level since October, around 60 basis points in rate cuts this year, LSEG data showed on Monday, amid evidence of continued strength in the U.S. economy.

Ahead of the data, U.S. interest rate futures set the odds of the first cut occurring in June at about 60%, up from 51% on Monday, according to CME Group's (NASDAQ:CME) FedWatch tool, although the possibility of a hold has bumped up to 40%.

A solid CPI number will likely have markets pricing out a June cut, which could see the dollar rising sharply, and the risk that Japan will need to intervene to defend its yen.

The euro was steady as the European Central Bank meeting on Thursday fast approaches. The ECB is also expected to hold rates this week, although traders betting the central bank will start cutting in June will be looking for signals from policymakers.

Key developments that could influence markets on Wednesday:

Data : U.S. March CPI, Italy retail sales, Sweden GDP

© Reuters. FILE PHOTO: lags fly over the Federal Reserve building on a windy day in Washington, U.S., May 26, 2017. REUTERS/Kevin Lamarque/File Photo

Earnings: Airbus shareholders' meeting, Deutsche Telekom AG (ETR:DTEGn) annual shareholders meeting, Exor NV 2023 earnings

Debt auctions: UK 3-year government debt; Germany reopening of 17-year government debt

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