(Bloomberg) -- US equity futures steadied after a gauge of producer price inflation came in line with expectations, while investors debate the likelihood of an interest rate cut in December.
Contracts for the S&P 500 and Nasdaq 100 gave up a modest gain and Treasury yields rose after the data amid signs that a post-election equity surge is starting to stall.
Investors are trying to balance a picture of easing inflation and falling rates against the possibility that President-elect Donald Trump will implement hardline pledges on taxes and tariffs, reigniting price growth next year. Confirmation of a Republican election clean sweep suggests more policy leeway for Trump and limits potential curbs on his power.
“There is expectation that Trump’s policies will be market friendly, growth friendly, will be impacting higher inflation but not massively, deregulation is going to be good for some sectors,” said Amelie Derambure, senior multi-asset portfolio manager at Amundi. “The assumption is we have good, soft Trump with no big negative impact priced by markets.”
The dollar index extended its rally to hold near two-year highs after the data. Bitcoin traded at about $91,000, holding close to Wednesday’s record high.
The producer price index for final demand increased 0.2% from a month earlier after rising a revised 0.1% in September, Bureau of Labor Statistics data showed Thursday. Separately, applications for US unemployment benefits fell to the lowest level since May last week, indicating the robustness of the labor market.
Several Fed officials Wednesday reiterated their deep uncertainty over how far the central bank will need to lower interest rates with the central bank’s 2% inflation target still elusive. Fed chief Jerome Powell is also due to speak later in the day.
Currently, money markets price around 19 basis points of rate cuts for December and several policymakers have urged a cautious approach. Fed Governor Adriana Kugler, for instance, said on Thursday that rate cuts should be paused if progress on inflation stalls.
Analysts at Brown Brothers Harriman said that with Trump likely to have the wherewithal to carry out his agenda, the scope for rate cuts could be limited going forward. The dollar is up more than 2% so far this month on the prospect of pro-growth policies and fewer rate cuts.
“Market pricing for the Fed has already adjusted, which is giving the dollar a huge lift,” they wrote, advising that “investors should continue to lean into dollar strength.”
Among individual stocks, Cisco Systems Inc. fell in premarket trading after the networking company firm gave a conservative outlook, while Nu Holdings Ltd. dropped after the fintech company reported third-quarter net interest income that missed consensus estimates. In Europe, a pair of bullish outlooks from chip-equipment maker ASML Holding NV and German industrial giant Siemens AG, lifted the Stoxx 600 index by about 0.8%.
Key events this week:
- US PPI, jobless claims, Thursday
- Fed speakers include Jerome Powell, John Williams and Adriana Kugler, Thursday
- China retail sales, industrial production, Friday
- US retail sales, Empire manufacturing, industrial production, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were unchanged as of 8:44 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average rose 0.1%
- The Stoxx Europe 600 rose 1%
- The MSCI World Index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.4% to $1.0524
- The British pound fell 0.4% to $1.2655
- The Japanese yen fell 0.4% to 156.11 per dollar
Cryptocurrencies
- Bitcoin rose 2.7% to $91,020.29
- Ether rose 1.2% to $3,191.88
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.47%
- Germany’s 10-year yield declined one basis point to 2.38%
- Britain’s 10-year yield advanced two basis points to 4.54%
Commodities
- West Texas Intermediate crude rose 1.7% to $69.18 a barrel
- Spot gold fell 0.6% to $2,557.87 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Chiranjivi Chakraborty and John Viljoen.
©2024 Bloomberg L.P.