US Futures Calm Before Fed-Favored Inflation Gauge: Markets Wrap

US equity futures were steady and European stocks rose as traders awaited an inflation reading preferred by the Federal Reserve as a measure of underlying price pressures.

(Bloomberg) — US equity futures were steady and European stocks rose as traders awaited an inflation reading preferred by the Federal Reserve as a measure of underlying price pressures. 

A gauge of global shares headed for a second-straight quarterly gain, underscoring investor optimism in the face of banking turmoil and elevated interest rates.

Contracts on the S&P 500 edged higher, while those on the tech-heavy Nasdaq 100 were little changed, with the underlying index set for its strongest March since 2010. Consumer-related stocks led gains in the Stoxx Europe 600 Index. Digital World Acquisition Corp., the blank-check firm taking Donald Trump’s media company public, rallied in premarket after he became the first former president to be indicted. Other Trump-linked stocks also gained. 

Technology shares have led the charge globally this quarter, surging 19%, the most since mid 2020. The upbeat tone has been on display this week, with the S&P 500 climbing 0.6% Thursday in its third increase in four days. 

On the outlook for rates, all eyes Friday are on the so-called PCE Core Deflator, which is expected to show that high inflation persisted last month. A round of Fed speakers on Thursday suggested more monetary tightening was necessary to quell inflation, even after the collapse of three US banks this month. 

The dollar strengthened Friday, trimming some of its declines this month. Treasury yields steadied at the end of a quarter of wild swings. Investors have struggled to adjust for banking collapses and the shifting outlook for interest rates amid high inflation and threats to economic growth. The two-year yield was around 4.13% Friday while the 10-year maturity was about 3.55%.

“The Fed’s preferred measure of inflation could generate some volatility within the fixed income markets if we see any surprises,” economists at Rand Merchant Bank in Johannesburg wrote in a note. “Risks are tilted to the upside, and if the data shows that inflation pressures remained strong in February, the inversion of the US yield could deepen even further.”

Traders also remained on guard for any choppiness amid quarter-end rebalancing from pension funds and options hedging activity. And they continue to debate the extent to which policy makers may cut interest rates this year. Several strategists have said markets are wrong to expect easing by the Fed this this year as the labor market remains robust, though US unemployment claims ticked up for the first time in three weeks. 

On Thursday, Boston Fed President Susan Collins said tightening was needed, while Richmond Fed President Thomas Barkin said the Fed can raise rates more if inflation risks persist.

Investors are piling into cash at their fastest pace since the pandemic, unnerved by a series of bank runs while seeking out higher interest rates at money-market funds, according to Bank of America Corp. strategists. During the first three months of this year, investors poured $508 billion into cash funds in their largest quarterly inflow since the early days of Covid-19 three years ago, the strategists wrote, citing EPFR Global data. 

More than $100 billion has flowed to money-market funds in the past two weeks alone, they said. 

Meanwhile, strategists at Citigroup Inc. said the focus among investors is set to shift from worries about high interest rates to concerns about the risks of a recession, and as that happens, US stocks look more attractive than those in Europe.

A team led by Beata Manthey upgraded US stocks to overweight from underweight on Friday as they “perform more defensively than other markets” during earnings recessions. They expect global earnings-per-share to contract 5% in 2023 and say that analysts are likely to slash profit estimates even further. 

The strategists cut European stocks ex-UK to neutral after several months of outperformance due to their cyclical nature, and as they lag behind the US leading up to and during earnings recessions.

In Europe, euro-area inflation plunged by the most on record, but a new high for underlying price gains highlighted the tricky task facing the European Central Bank as it decides how far to lift interest rates. Consumer prices rose 6.9% from a year ago in March — down from 8.5% in February and less than the 7.1% median estimate of economists, but core inflation quickened to 5.7%.

Elsewhere in markets Friday, oil headed for a weekly surge amid ongoing disruption to Iraqi exports. Gold was little changed. Bitcoin was set to end its best quarter since March 2021 with a gain of almost 70%.

Key events this week:

  • US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
  • ECB President Christine Lagarde speaks, Friday
  • New York Fed President John Williams speaks, Friday

Some of the main moves in markets:


  • S&P 500 futures rose 0.2% as of 7:02 a.m. New York time
  • Nasdaq 100 futures were little changed
  • Futures on the Dow Jones Industrial Average rose 0.2%
  • The Stoxx Europe 600 rose 0.4%
  • The MSCI World index was little changed


  • The Bloomberg Dollar Spot Index rose 0.2%
  • The euro fell 0.3% to $1.0869
  • The British pound was little changed at $1.2376
  • The Japanese yen fell 0.5% to 133.31 per dollar


  • Bitcoin fell 0.9% to $27,904.73
  • Ether fell 0.1% to $1,793.45


  • The yield on 10-year Treasuries was little changed at 3.55%
  • Germany’s 10-year yield declined two basis points to 2.35%
  • Britain’s 10-year yield advanced two basis points to 3.54%


  • West Texas Intermediate crude rose 0.7% to $74.89 a barrel
  • Gold futures were little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller.

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