European stocks waver, futures slip

Bloomberg

Stocks in Europe trimmed an advance on Thursday amid mixed corporate earnings, while US futures slipped as traders await key US inflation data that may shape views on how aggressively the Federal Reserve will tighten monetary policy.
The Stoxx Europe 600 index was little changed after paring a gain of as much as 0.5%. Siemens AG jumped as much as 7% after reporting better-than-expected earnings, while upbeat results also lifted AstraZeneca, Societe Generale and Pernod Ricard. Unilever falls more than 4% after warning inflation will erode profits for next two years, while Delivery Hero slumped 16% after
underwhelming guidance.
S&P 500 and Nasdaq 100 futures drifted lower following a broad Wall Street rally spurred by the technology sector. Uber Technologies Inc. and Walt Disney Co. gained in late US trading on robust earnings, with Twitter Inc. still to report on Thursday. Asian stocks made modest gains.
Treasury yields were steady and the dollar was little changed, while bond yields in Europe ticked higher. Oil’s rally stalled just below $90 a barrel and gold held at a two-week high on haven demand amid risks from the inflation and geopolitical tension.
A surprise reading either side could shift bets on the pace of Fed interest-rate hikes and inject more volatility into stocks and bonds.
“The market is being somewhat sanguine about what will happen in the second half of 2022,” Sonal Desai, chief investment officer at Franklin Templeton Fixed Income, wrote in a note. “There is an expectation that inflation will decline sharply. I think that might be optimistic because a lot of the factors driving inflation will still be with us. The Fed is already behind the curve.”
Fed Bank of Cleveland President Loretta Mester and her Atlanta counterpart Raphael Bostic said all options are on the table for the size of policy makers’ first interest-rate increase in March, but Mester doesn’t see a “compelling case” for a 50-basis-point hike. They indicated they prefer the Fed to start reducing its balance sheet soon.
Markets are pricing in more than five quarter-point Fed hikes in 2022. Some remain skeptical about such bets, such as Bokeh Capital Partners Chief Investment Officer Kim Forrest, who said on Bloomberg Television that she sees expects inflation to ease as government handout programmes are
removed.
Five to seven Fed hikes “is just so crazy — it’s a lot driven by bond people here who really just want to get that 10-year to the 3% rate and I don’t know that’s possible,” said Forrest, who expects maybe two Fed rate increases in 2022.