(Bloomberg) — European stocks slipped and US equity futures gave up gains as worries about scorching inflation and a looming recession countered a strong start to the earnings season. The pound fell after UK inflation rose faster than economists expected.
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The Stoxx Europe 600 Index dropped 0.4%, with real estate and miners the biggest laggards. Contracts on the S&P 500 edged lower after rising as much as 1.1%, with Nasdaq 100 futures steady. Netflix Inc. rallied in New York premarket trading after reporting a surge in subscribers.
The pound weakened after soaring food prices drove UK inflation back into double digits in September, matching a 40-year high of 10.1% and intensifying pressure on the central bank and Liz Truss’s government to act. The yield on 10-year UK government debt rose.
“The outlook for the UK is very, very difficult and certainly when focusing on our asset allocation it’s predominantly in the US where we have much higher conviction and certainty of outcome,” Grace Peters, JPMorgan Private Bank’s head of investment strategy, said on Bloomberg Television.
Treasury yields held near multi-year highs before the publication of US housing data for September and the Fed’s Beige Book. The yield on the 10-year rose to 4.07% and the dollar strengthened.
An Asia Pacific share gauge fell. In Japan, authorities continued their jawboning of the yen, with Finance Minister Shunichi Suzuki saying he is increasing the frequency of monitoring foreign-exchange markets. The currency hovered above 149 per dollar. The 10-year government bond yield rose above the 0.25% upper limit of the central bank’s target range, a breach that’s likely to prompt the Bank of Japan to step up bond purchases to limit the advance.
Upbeat company results, cheaper valuations and UK policy reversals have helped buoy risk appetite in recent sessions. At the same time, investors are monitoring signs of weakness in the global economy and the impact of persistent inflation on the Federal Reserve and other hawkish central banks.
Terry Sandven, chief equity strategist at US Bank Wealth Management, warned that challenges remain for equity markets. “Analysts’ consensus earnings projections remain subject to downward revision,” he wrote in a note. “Inflationary trends, hawkish Fed commentary, and a slower earnings growth pace in 2023 are key contributors weighing on investor sentiment and equity prices.”
Some regional Fed directors last month favored raising a key interest rate by a smaller or larger amount than the 75 basis points that policy makers ultimately decided was needed to curb persistent inflation, according to minutes of discount-rate meetings released Tuesday.
Read: Fed’s Bostic Says Slowing Inflation Best for Long-Run Employment
Oil fluctuated amid concerns that the European Union’s latest sanctions on Russian fuel could exacerbate the market tightness that the US is trying to alleviate with additional sales. The Biden administration will announce Wednesday a plan to release 15 million barrels from US emergency oil reserves in an effort to ease high gasoline prices.
Elsewhere, gold declined and Bitcoin slid below $19,200.
Key events this week:
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Euro area CPI, Wednesday
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EIA crude oil inventory report, Wednesday
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US MBA mortgage applications, building permits, housing starts, Fed Beige Book, Wednesday
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Fed’s Neel Kashkari, Charles Evans, James Bullard speak, Wednesday
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US existing home sales, initial jobless claims, Conference Board leading index, Thursday
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Euro area consumer confidence, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 0.4% as of 9:37 a.m. London time
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Futures on the S&P 500 fell 0.2%
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Futures on the Nasdaq 100 were little changed
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Futures on the Dow Jones Industrial Average fell 0.2%
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The MSCI Asia Pacific Index fell 0.8%
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The MSCI Emerging Markets Index fell 1.2%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.4% to $0.9823
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The Japanese yen fell 0.1% to 149.41 per dollar
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The offshore yuan fell 0.3% to 7.2456 per dollar
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The British pound fell 0.5% to $1.1263
Cryptocurrencies
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Bitcoin fell 1% to $19,177.57
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Ether fell 1.3% to $1,297.23
Bonds
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The yield on 10-year Treasuries advanced six basis points to 4.07%
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Germany’s 10-year yield advanced eight basis points to 2.36%
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Britain’s 10-year yield advanced seven basis points to 4.02%
Commodities
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Brent crude fell 0.6% to $89.52 a barrel
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Spot gold fell 0.7% to $1,639.93 an ounce
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