US equity futures steady  before inflation lands

BLOOMBERG

US equity futures steadied as investors awaited US inflation data that may shed light on the Federal Reserve’s next policy move.
Contracts on the S&P 500 erased a small gain to trade flat before the widely-watched report that could stoke fresh volatility. Treasury two-year yields rose, holding above 4%, while the dollar was broadly lower.
US headline inflation is expected to slow, with the core reading forecast to ease both on a monthly and yearly basis, supporting market expectations that the Fed will deliver one more rate hike before a pause and pivot to easier policy in the second half of the year.
For Fed officials juggling the need to curb rampant inflation and stabilise wobbly banks, it’s a delicate balancing act.
“Markets have taken the view that the Fed needs to ensure stability in the financial system. That means easing back on rate hikes which could topple the economy,” said Russ Mould, investment director at AJ Bell. “However, the reason why rates have been going up so fast over the past 12 months is down to rising inflation, so today’s update will still matter to the Fed.”
Messages from Fed officials themselves have been mixed. Chicago Fed President Austan Goolsbee argued the central bank should exercise “prudence and patience,” while New York Fed President John Williams said officials have more work to do to tackle inflation.
Swap contracts are pricing in about three-in-four odds of another quarter-point Fed hike next month. Traders predict US rates will peak around 5%, with policymakers then cutting by at least 50 basis points by year-end. The dollar weakened against most of its Group-of-10 peers, while the euro advanced for a second day.
Elsewhere, Bitcoin slipped below $30,000 after hitting its highest level in 10 months. Oil steadied as traders tracked supply constraints and gold edged higher. The Stoxx Europe 600 Index rose 0.2%, led by property firms and automakers.
In US premarket trading, Bed Bath & Beyond gained on the retailer’s move to sell shares to shore up cash. S&P 500 futures were little changed in New York and Nasdaq 100 futures were little changed.
While futures on the Dow Jones Industrial Average rose 0.2%, the Stoxx Europe 600 rose 0.2% and MSCI World index was little changed.
The Bloomberg Dollar Spot Index was little changed and the euro was little changed at $1.0920. The British pound fell 0.2% to $1.2404. The yield on 10-year Treasuries advanced two basis points to 3.45% and Germany’s 10-year yield advanced two basis points to 2.33%.