US stock futures slid on Friday as investors awaited the latest indication of the strength of inflationary pressures, while European markets fluctuated between small gains and losses.
S&P 500 futures were 0.5 per cent lower and Nasdaq Composite futures fell 0.9 per cent. The moves indicate a reversal of Thursday’s rally on Wall Street, which followed a string of declines earlier in the week as strong economic data sparked worries of further interest rate rises from the Federal Reserve. The indices are down 2.5 per cent and 2.6 per cent respectively this week.
US personal consumption expenditures data, the Fed’s preferred inflation metric, is set to be released at 1.30pm UK time. A higher than expected figure would likely be taken as further evidence that the Fed would stick to its aggressive rate-rise agenda.
“The outlook for core PCE is mixed,” analysts at SEB Research said. “Our forecast is for a monthly increase of 0.3-0.4 per cent, slightly below the consensus estimate but still too high to be in line with the Fed’s target.”
In Europe, the region-wide Stoxx 600 rose 0.15 per cent, while London’s FTSE 100 was up 0.3 per cent, having been down by the same percentage earlier.
Germany’s Dax fell 0.2 per cent and the French Cac 40 slipped 0.1 per cent.
“In the short run European equities have relative strength versus the US, as their composition is less sensitive to interest rates, and they haven’t yet experienced the full dividend of the milder weather and lower energy costs,” said Antonio Cavarero, head of investments at Generali Insurance Asset Management.
The price of European natural gas has fallen to its lowest level since the build-up to the first anniversary of Russia’s full-scale invasion of Ukraine.
However, disquiet over the next move of the European Central Bank persists. On Friday Joachim Nagel, president of the Bundesbank and a member of the ECB’s governing council, said inflation was likely to “remain at very high levels”, requiring “significant interest rate hikes beyond March”.
In Asia, the Hang Seng index fell 1.7 per cent, while China’s CSI 300 lost 1 per cent. Although ecommerce group Alibaba beat analysts’ expectations with its fourth-quarter earnings, its shares fell 5.4 per cent, suggesting investor skittishness over China’s economy despite the government easing strict Covid-19 restrictions.
The euro was down 0.15 per cent while the dollar index, which measures the greenback against a basket of six peer currencies, was up 0.2 per cent.
US Treasury yields nudged downwards, with the 10-year and two-year both falling 0.02 percentage points, to 3.9 per cent and 4.7 per cent respectively. Yields on 10-year German Bunds were steady at 2.47 per cent.
Brent crude rose 0.7 per cent to $82.78 per barrel, while WTI, the US equivalent, climbed 0.6 per cent to $75.86 per barrel.
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