Futures decline, yields climb as traders await policy data

Bloomberg

US futures declined as investor sentiment swung between hopes that inflation has peaked and concern that large interest-rate hikes by the Federal Reserve will hamper economic growth. Treasury yields rose and the dollar gained.
Contracts on the S&P 500 and Nasdaq 100 fluctuated before turning lower, with the latter underperforming after the underlying gauges posted modest rallies. European stocks were flat, while the MSCI Asia Pacific Index reversed earlier gains to trade down.
Traders remain focused on US economic data, with a decline in producer prices there providing some relief after consumer inflation jolt saw wagers for rate increases ratchet higher and stocks slump the most in two years. Jobs, manufacturing and retail numbers will be parsed for clues on the strength of the economy and inflation expectations.
“Markets seem torn between a bearish sentiment on one hand, supported by lingering macro threats in a tighter liquidity environment, and dip buyers on the other who continue to bet on the inflation peak,” said Pierre Veyret, an analyst at ActivTrades.
Swaps traders are pricing in a 75 basis point hike when the Fed meets next week, with some wagers appearing for a full-point move. The continued rise in rate-sensitive Treasuries deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century.
Asian currencies remained at risk from a strong greenback. The offshore yuan weakened above 7 per dollar for the first time since July 2020. The yen declined to trade around 143.6 per dollar after it rallied away from just under the closely-watched 145 level on signs the Bank of Japan was preparing an intervention. Oil fluctuated as traders grappled with concerns about global demand and assessed comments from the US on refilling strategic reserves.
Natural gas increased as traders assessed Europe’s steps to contain the energy crisis, with governments making plans to shut down power in some places to avoid a total collapse of the system this winter. Gold fell.
Futures on the S&P 500 fell 0.2% in New York. Futures on the Nasdaq 100 fell 0.4%. Futures on the Dow Jones Industrial Average fell 0.1%. The Stoxx Europe 600 was little changed.
The MSCI World index fell 0.1%. The Bloomberg Dollar Spot Index rose 0.2%. The euro fell 0.1% to $0.9971. The British pound fell 0.4% to $1.1489. The Japanese yen fell 0.3% to 143.54 per dollar.
The yield on 10-year Treasuries advanced five basis points to 3.45%. Germany’s 10-year yield advanced four basis points to 1.76%. Britain’s 10-year yield advanced two basis points to 3.15%. West Texas Intermediate crude fell 0.6% to $87.94 a
barrel.