Wall Street on edge before key US inflation gauge: markets wrap

(Bloomberg) — U.S. stock futures fell and bond yields fell on Friday ahead of the release of a crucial U.S. inflation gauge that could bolster the case for Fed rate cuts starting in March.

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Nasdaq 100 and S&P 500 futures fell slightly, with Nike stock falling more than 11% in pre-market trading in New York after the company said it was looking to save up to $2 billion in costs amid weaker sales expectations. The sell-off also swept video game companies, with double-digit losses in US-listed Chinese names NetEase Inc. and Bilibili Inc., after China surprised the sector with new restrictions.

The sell-off in gaming stocks, which earlier wiped billions of dollars off the value of China’s top online names, sent Prosus NV down a record 20% in Europe, while rivals including Ubisoft SA also fell. Meanwhile, sportswear companies Adidas AG and Puma SE took a hit from Nike’s weak report. The broader Stoxx 600 stock index was flat, hovering near its highest levels since January 2022.

The big focus now for traders ahead of the Christmas long weekend is the US Core Personal Consumption Expenditures Price Index – the Fed’s preferred measure of inflation. Economists polled by Bloomberg expect inflation in November to fall to 3.3%, from 3.5% the previous month.

The data could allow the S&P 500 to post an eight-week winning streak – the longest in more than five years – and provide new momentum for US Treasuries.

“Today’s personal consumption expenditures numbers — if they are in line with expectations — will simply encourage market views that the FOMC will cut interest rates at either the March or May meeting,” said Stuart Cole, chief macro economist at Equiti Capital.

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Swap traders are pricing in about 150 basis points of Fed cuts next year, twice what the central bank has indicated. These bets weigh on the US dollar, which hit five-month lows against its G10 rivals, while 10-year US Treasury yields fell by three basis points, holding just short of five-month lows.

Meanwhile, British government borrowing costs fell to near their lowest levels in eight months, after data showed the economy contracted in the third quarter.

These numbers will raise alarm about slowing economic growth across the developed world. The downward revision to US GDP for the third quarter and Nike’s lackluster results also underscore these concerns.

Earlier, Chinese government bonds rose, with long-term yields falling to their lowest levels in nearly two decades after a new round of deposit interest rate cuts at large banks.

Oil posted its biggest weekly gain in two months as shipping companies took long routes to avoid militant attacks in the Red Sea. Brent crude futures were trading near $80 per barrel, heading for weekly gains of about 5%.

Main events this week:

  • US personal income and spending, new home sales, durable goods, and the University of Michigan Consumer Confidence Index, Friday

Some key movements in the markets:

Stores

  • S&P 500 futures were little changed as of 7 a.m. New York time

  • Nasdaq 100 futures fell 0.1%

  • Dow Jones Industrial Average futures fell 0.3%

  • The Stoxx Europe 600 index was little changed

  • The MSCI World Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%.

  • The euro rose 0.1 percent to $1.1027

  • The British pound rose 0.4 percent to $1.2735

  • There was little change in the Japanese yen at 142.00 to the dollar

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Digital currencies

  • Bitcoin fell 0.6% to $43,761.26

  • Ethereum rose 2.9% to $2,315.06

Bonds

  • The yield on the 10-year Treasury note fell three basis points to 3.86%.

  • The yield on 10-year German bonds was little changed at 1.97%.

  • The yield on British 10-year bonds fell one basis point to 3.52%.

Goods

  • West Texas Intermediate crude rose 0.8% to $74.49 a barrel

  • Spot gold rose 0.7 percent to $2,061.25 an ounce

This story was produced with assistance from Bloomberg Automation.

-With assistance from Divya Patel and Michael Msika.

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