Stocks pause as market digests latest US inflation stats

Stocks are ending the week on a muted note after the latest US inflation data weakened the case for imminent Federal Reserve rate cuts.

The Stoxx Europe 600 index was little changed, with gains for telecoms and carmakers offsetting declines for real estate and consumer-products shares. The gauge remains on track for its eighth weekly advance, the longest streak since 2018, amid generally dovish comments from European Central Bank officials. Futures on the Nasdaq 100 and S&P 500 were flat.

Japan’s yen weakened after the country’s largest labor union group announced blowout wage increases which may nudge the Bank of Japan toward raising interest rates for the first time since 2007. A rate hike has been largely priced in by markets, but a slow pace of tightening after that would reduce the yen’s yield advantage over the dollar as the Fed remains cautious about lowering borrowing costs.

“The figures meet the BOJ’s bar on wages. The probability of seeing a March hike is higher,” said Evelyne Gomez-Liechti, a strategist at Mizuho International. “But whether the BOJ hikes in March or April, there are still a lot of uncertainties on the terminal rate and how fast they will move to arrive there.”

Treasuries steadied after selling off Thursday with 10-year yields rising 10 basis points. The moves were driven by producer price index data that rose more than expected in February, echoing the higher than anticipated consumer price data earlier in the week. Together, the figures show the Fed’s work in quelling inflation is not complete.

Higher yields supported the greenback as the Bloomberg Dollar Spot Index extended gains from its previous session.

The Fed is expected to keep rates unchanged at the March 19-20 meeting for the fifth straight gathering, where the focus will be on the central bank’s new “dot plot.” The median forecast of policymakers in December showed three quarter-point rate reductions for 2024.

Equity benchmarks in Australia and South Korea declined. Shares in Hong Kong fell around 2% while those on the mainland swung between gains and losses. Earlier, the People’s Bank of China kept the rate on its one-year policy loans steady at 2.5% and drained cash from the banking system for the first time since November 2022.

Copper, typically seen as a bellwether of the global economy, surged to $9,000 a ton, as bets that a pick-up in global manufacturing activity will push up demand for industrial commodities.

Also in commodities, oil held near a four-month high after the IEA forecast a supply deficit through 2024, changing its earlier projection of a surplus, on the premise OPEC+ maintains production cuts. Bitcoin fell Friday, retreating from its all-time peak of almost $73,798 a day earlier.

Key events this week:

• Bank of England issues inflation survey, Friday
• US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday

Some of the main moves in markets

Stocks

• The Stoxx Europe 600 was little changed as of 8:45 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index fell 1%
• The MSCI Emerging Markets Index fell 1.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was little changed at $1.0885
• The Japanese yen fell 0.3% to 148.76 per dollar
• The offshore yuan was little changed at 7.2041 per dollar
• The British pound was little changed at $1.2744

Cryptocurrencies

• Bitcoin fell 4.5% to $67,489.79
• Ether fell 4% to $3,687.33

Bonds

• The yield on 10-year Treasuries was little changed at 4.28%
• Germany’s 10-year yield advanced two basis points to 2.44%
• Britain’s 10-year yield advanced one basis point to 4.10%

Commodities

• Brent crude fell 0.4% to $85.05 a barrel
• Spot gold rose 0.3% to $2,167.74 an ounce

This story was produced with the assistance of Bloomberg Automation.