Tech gains fade, US inflation in focus

Stocks and bonds retreated before key inflation readings from the U.S. and China later this week and the earnings season kicks off on Friday. 

U.S. stock futures dropped with Europe’s Stoxx 600 benchmark as investors shrugged off tech-led gains that rolled across global markets and drove a Japanese gauge to a 34-year high. Shares and bonds of Spanish blood plasma firm Grifols SA tumbled after short seller Gotham City Research LLC published a report criticizing the company’s financial reporting. 

As Monday’s bounce fades, investors are turning to inflation readings and corporate scorecards amid a steady erosion of corporate profits and the highest interest rates in a generation. Federal Reserve Governor Michelle Bowman said inflation could fall toward the central bank’s 2% target with interest rates held at current levels, and offered potential backing for lowering borrowing costs if price pressures fade. 

“The new year is already putting the 2023 Santa rally to the test,” said Evelyne Gomez-Liechti, a strategist at Mizuho International, citing pressures including unexpected U.S. labor strength, an overextended rally and heavy supply of new government and corporate debt. At the same time, U.S. 10-year yields are unlikely to breach last week’s highs before the release of the U.S. inflation report on Thursday, she said.

European government bonds slumped before new borrowing from the UK, Netherlands and Austria, with the yield on 10-year British and German benchmarks up at least 5 basis points.

The tech rally in U.S. stocks on Monday came as Nvidia Corp. surged after announcing new artificial-intelligence products for personal computers. The Nasdaq 100 jumped the most since November on Monday and the S&P 500 traded near a record high while Japan’s Nikkei 225 index closed up 1.2% — a level unseen since March 1990.

Elsewhere, bitcoin dipped after surging past $47,000 on bets that the U.S. is poised to approve the launch of the nation’s first exchange-traded funds investing directly in the world’s largest digital asset.

Oil held the largest drop in about a month on signs of a weaker physical market, including a deep pricing cut by OPEC+ leader Saudi Arabia.

Key events this week:

• China aggregate financing, money supply, new yuan loans, Tuesday
• Eurozone unemployment, Tuesday
• Germany industrial production, Tuesday
• U.S. trade, Tuesday
• U.S. wholesale inventories, Wednesday
• The World Economic Forum’s global risks report is released, Wednesday
• New York Fed President John Williams speaks, Wednesday
• U.S. CPI, initial jobless claims, Thursday
• China CPI, PPI, trade, Friday
• UK industrial production, Friday
• U.S. PPI, Friday
• Some of the biggest US banks report fourth-quarter results, Friday
• Minneapolis Fed President Neel Kashkari speaks, Friday
• ECB chief economist Philip Lane speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.1% as of 9:44 a.m. London time
• S&P 500 futures fell 0.3%
• Nasdaq 100 futures fell 0.4%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The MSCI Asia Pacific Index rose 0.2%
• The MSCI Emerging Markets Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0942
• The Japanese yen rose 0.2% to 143.87 per dollar
• The offshore yuan was little changed at 7.1694 per dollar
• The British pound fell 0.1% to $1.2735

Cryptocurrencies

• Bitcoin fell 1% to $46,647.51
• Ether fell 1.9% to $2,295.27

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.05%
• Germany’s 10-year yield advanced five basis points to 2.19%
• Britain’s 10-year yield advanced six basis points to 3.84%

Commodities

• Brent crude rose 1.6% to $77.33 a barrel
• Spot gold rose 0.4% to $2,036.04 an ounce

This story was produced with the assistance of Bloomberg Automation.