- US stock futures fell ahead of key inflation data that could influence the Federal Reserve’s thinking.
- Analysts estimate US consumer price inflation came in at 5.9% in October, its highest level since 1990.
- Stocks have been buoyant despite inflation pressures thanks to a strong earnings season.
US stock futures dipped on Wednesday as investors awaited key consumer inflation data that could influence the Federal Reserve’s thinking around the outlook for interest rates.
S&P 500 futures were down 0.13% after the benchmark US stock index snapped an eight-day winning streak with a 0.35% fall Tuesday. Dow Jones futures were 0.12% lower, while Nasdaq 100 futures were down 0.07%.
Stocks dropped overnight in Asia after inflation faced by Chinese manufacturers rose at the fastest pace in 26 years, reminding investors of the risks to assets. China’s CSI 300 lost 0.53%, while Tokyo’s Nikkei 225 slipped 0.61%. Europe’s Stoxx 600 was little changed.
US and global equities have been lifted by strong corporate earnings reports in recent weeks, after a rocky September. Central banks have also been more cautious about withdrawing support for pandemic-hit economies than many expected.
Yet sharply rising inflation could spoil the party and force central banks to start tightening monetary policy quickly.
Investors were awaiting US consumer price index inflation data on Wednesday. It is expected to show CPI inflation rose 5.9% year-on-year in October, up from 5.4% in September, according to a poll of analysts by Bloomberg. That would be the fastest pace in 31 years, and the sixth straight month of inflation at 5% or more.
Month-on-month, inflation is expected to come in at 0.6%, up from 0.4% in September. The data comes hot on the heels of the US producer price index inflation released Tuesday, which rose to the highest level since records began in 2010.
“In terms of today’s price action, traders and investors are going to be lazer focused on one thing and one thing only, and that is the US CPI data,” said Naeem Aslam, chief market analyst at trading platform Avatrade.
“If we do get to see a reading which confirms that inflation is only a one way trade, we could see traders becoming more nervous and that can trigger an intense sell-off for the tech stocks – a trend which we have seen repeatedly this year.”
Despite the sharp rises in inflation around the world, US bond yields have cooled sharply in recent weeks. Yet they edged higher on Wednesday ahead of the inflation data.
The yield on the key 10-year US Treasury note picked up to around 1.481% on Wednesday after falling as low as 1.410% on Tuesday. It rose as high as 1.7% in October as traders worried about price rises and central bank policy. Yields move inversely to prices.
Oil prices slipped slightly following gains on Tuesday after the US Energy Information Administration judged the market will cool next year, reducing the chances that it will immediately release oil from strategic reserves.
Earnings season continues with Disney the highlight of the day in the US. Amazon-backed electric-vehicle maker Rivian is expected to float on the Nasdaq exchange in a blockbuster $11.9 billion IPO.
Cryptocurrency prices cooled after hitting new heights on Tuesday. Bitcoin was down 2% on the Bitstamp exchange to $66,661, having hit a record high of above $68,500 a day earlier.