UK Inflation Reality Check Stocks, Bonds Jolt: Markets Wrap

(Bloomberg) — European stocks fell and bond yields rose after the latest price data from the UK cast doubt on hopes that price pressures had dissipated.

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The Stoxx Europe 600 fell 0.3%, the FTSE 100 underperformed and raised questions about when the Bank of England might cut interest rates after data showed UK inflation fell less than expected last month. The pound strengthened and gilts fell, sending two-year yields about 12 basis points higher.

Bond yields rose across Europe, while borrowing costs on the 10-year U.S. Treasury rose as well.

The figures will reinforce concerns that inflationary pressures will remain sticky globally, preventing central banks from easing policy as expected. Earlier on Wednesday, the Reserve Bank of New Zealand kept interest rates unchanged and signaled policy would remain tight for longer, while Federal Reserve Governor Christopher Waller said on Tuesday he needed to see more good inflation numbers to initiate interest rate cuts.

“Both the RBNZ and UK inflation data highlight the fraught nature of the current moment, with investors struggling to gauge both the timing and magnitude of long-awaited central bank easing cycles,” said Richard McGuire, head of rates strategy at Rabobank. Note.

U.S. stock futures were little changed after the S&P 500 hit another record high on Tuesday as artificial intelligence bellwether Nvidia Corp. announced its results after the market close. Wall Street estimates it expects a 243% gain in earnings, but a 90% year-to-date stock rally means it may struggle to match sky-high expectations.

In Europe, shares of Anglo American Plc fell as investors waited to see if larger rival BHP Group Ltd would launch its takeover bid to create a global copper behemoth. BHP must announce a firm intention to make an offer by 5pm London time. Among the other major stock trio, Marks & Spencer Group plc rose to its highest since November 2018 after delivering better-than-expected results and a strong outlook.

Energy stocks lost as Brent crude futures fell for a third straight day.

Gold, silver and copper eased after hitting record highs, although recent gains in metals and grains renewed inflation fears, with Bloomberg’s spot commodity index nearing a 16-month high.

The story continues

Traders have dialed back expectations for Fed interest rate cuts this year, now seeing around 40 basis points of rate cuts in 2024, up from a 50 basis point cut last week. Minutes from the central bank’s last policy meeting later on Wednesday could provide further clues about the thinking of rate-setters.

Highlights of this week:

• US existing home sales, Wednesday

• Feed Minutes, Wednesday

• Nvidia earnings, Wednesday

• Eurozone S&P Global Services and Manufacturing PMIs, Consumer Confidence, Thursday

• G-7 Finance Meeting, May 23-25

• US new home sales, initial jobless claims, Thursday

• The central bank’s Raphael Bostick speaks Thursday

• US Durable Goods, Consumer Sentiment, Friday

• The central bank’s Christopher Waller speaks on Friday

Some key movements in the markets:

Shares

• The Stoxx Europe 600 was down 0.3% as of 9:16 a.m. London time.

• S&P 500 futures were little changed

• Nasdaq 100 futures were little changed

• The future of the Dow Jones Industrial Average was little changed

• The MSCI Asia Pacific index fell 0.1%

• The MSCI emerging market index rose 0.3%

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0853

• The Japanese yen fell 0.1% to 156.39 per dollar

• The maritime yuan was little changed at 7.2475 per dollar

• The British pound was up 0.2% at $1.2735

Cryptocurrencies

• Bitcoin rose 0.3% to $69,921.84

• Ether rose 0.2% to $3,754.82

Bonds

• The yield on 10-year Treasuries rose two basis points to 4.44%.

• Germany’s 10-year yield rose three basis points to 2.53%

• Britain’s 10-year yield improved 10 basis points to 4.23%.

materials

• Brent crude fell 1.2% to $81.85 a barrel

• Spot gold was down 0.2% at $2,415.50 an ounce

This story was produced with the help of Bloomberg Automation.

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