Stocks, US futures up as traders await CPI

Bloomberg

US index futures and European equities rise amid forecasts inflation in the world’s largest economy will post the lowest figure this year, warranting a less hawkish Federal Reserve.
Contracts on the S&P 500 and Nasdaq 100 advanced at least 0.1% each after the underlying indexes climbed on December 12 by the most in December. The Stoxx 600 gauge was buoyed by energy and technology stocks. Treasuries gained marginally. Oil traded higher on signs of further easing in China’s Covid rules. Oracle Corp jumped in premarket New York trading after posting results above expectations.
US stocks advanced as traders took comfort from economists’ projection for a 7.3% expansion in the US consumer price index (CPI) for November. If that expectation comes true, it would be the lowest reading in 11 months and fifth consecutive drop. While that would still leave inflation much higher than the Fed’s target of 2%, it could justify a slowdown in pace of monetary tightening, with a projected half-point move on Wednesday. However, it also leaves the bar low for disappointment and a selloff.
“The US CPI data will give us an idea on how the market pricing for the Fed’s terminal rate will clash with the dot plot projections, and that will, in all cases, hammer any potentially optimistic market sentiment,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “Therefore, even if we see a great CPI print and a nice market rally today, it may not extend past the Fed decision on Wednesday.”
The European equity benchmark recovered from earlier losses as traders awaited the US release but were also mindful of the ECB’s rate decision. The continent’s policymakers are expected to follow the Fed with their own half-point hike. Meanwhile, data showed UK wages are rising at close to a record pace, maintaining pressure on the Bank of England to keep hiking interest rates despite a worsening economic outlook.
Treasuries advanced marginally with the 10-year rate shedding 1 basis point. The Bloomberg Dollar Spot Index traded below its 200-day moving average, having fallen below it earlier this month. An Asian equity benchmark rises after Hong Kong’s decision to scrap its three-day Covid-19 monitoring period for arriving travellers.
Crude oil rallied, with West Texas Intermediate futures climbing above $74 a barrel. China’s ambassador to the US said the nation will continue relaxing its curbs and will welcome more international travellers soon.