A relief rally in Italian shares boosted risk appetite, while US equity futures pointed to a recovery on Wall Street in subdued trading Wednesday.
(Bloomberg) — A relief rally in Italian shares boosted risk appetite, while US equity futures pointed to a recovery on Wall Street in subdued trading Wednesday.
Assurances by the Italian government that a new windfall tax on banks will be capped spurred advances in UniCredit SpA and Intesa Sanpaolo SpA shares at the center of declines this week. The Stoxx Europe 600 climbed as much as 1%, while contracts on both the S&P 500 and Nasdaq 100 added 0.2%. Treasury yields steadied.
Other markets tilted risk-on, with the euro strengthening and copper rebounding.
Improving sentiment faces a key test Thursday when the latest US consumer price index is published. A closely watched bond-market gauge of inflation expectations is rising back toward a nine-year high, signaling elevated price pressures for years.
The “inflation report will be key if today’s rally is to be sustained,” said Lewis Grant, a senior portfolio manager at Federated Hermes. “Investor risk aversion has started to wane but remains volatile and investors are anxiously searching for the next signal.”
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The so-called US five-year inflation breakeven has risen to around 2.5%, just shy of the peak in April 2022, when it reached the highest since 2014.
Thursday’s reading is expected to show that consumer prices grew 3.3% in July from a year ago, up slightly from the prior month but still near the slowest pace in two years.
Meanwhile, 10-year Treasury yields steadied ahead of another closely watched bond auction later today. The US government is expected to sell $38 billion of new 10-year notes, $3 billion larger than the last 10-year note debut in May.
The debt auctions will gauge how concerned investors are about a rising US budget deficit, a week after Fitch Ratings decided to strip the US of its top credit rating. Tuesday’s $42 billion sale of three-year notes had a lower-than-expected yield, a sign that demand was stronger than anticipated.
Elsewhere, European natural gas jumped the most in almost two months as risks to LNG supplies mounted amid the possibility of worker strikes at some facilities in Australia.
- Shares in WeWork Inc. sank 17% in premarket trading after the co-working business said there is “substantial doubt” about its ability to continue operating.
- Country Garden Holdings Co.’s potential default could eclipse even that of China Evergrande Group in late 2021, according to Bloomberg Intelligence.
- Lyft Inc. stock dropped more than 5% in premarket trading after the ride-hailing company reported its slowest revenue growth since the pandemic.
- L’Occitane International SA’s controlling shareholder is in advanced talks on a potential deal to take the skin-care company private at a valuation of around $6.5 billion, people familiar with the matter said.
Key events this week:
- India rate decision, Thursday
- US initial jobless claims, CPI, Thursday
- Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
- UK industrial production, GDP, Friday
- US University of Michigan consumer sentiment, PPI, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.2% as of 8:15 a.m. New York time
- Nasdaq 100 futures rose 0.2%
- Futures on the Dow Jones Industrial Average rose 0.1%
- The Stoxx Europe 600 rose 0.7%
- The MSCI World index rose 0.2%
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0967
- The British pound fell 0.2% to $1.2722
- The Japanese yen was little changed at 143.48 per dollar
- Bitcoin fell 0.4% to $29,871.5
- Ether fell 0.1% to $1,861.31
- The yield on 10-year Treasuries advanced one basis point to 4.03%
- Germany’s 10-year yield advanced two basis points to 2.49%
- Britain’s 10-year yield was little changed at 4.39%
- West Texas Intermediate crude rose 0.9% to $83.64 a barrel
- Gold futures fell 0.2% to $1,956.70 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani, Michael Mackenzie and Denitsa Tsekova.
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