US Futures Rocket as Soft CPI Boosts Risk Appetite: Markets Wrap

(Bloomberg) — US stock-index futures extended gains and Treasuries rallied as inflation in the world’s largest economy fell sharper than expected, easing pressure on the Federal Reserve’s tightening campaign.

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Contracts on the S&P 500 and Nasdaq 100 indexes jumped at least 3% each. less than an hour before the spot markets open. Treasuries rallied with the two-year rate, the most sensitive to monetary policy, tumbling 19 basis points.

US Inflation Rises at Lowest Annual Rate Since January: TOPLive

Investors may treat the 7.7% headline figure as the latest evidence of peaking consumer-price growth, with potential to usher in an end to interest-rate hikes. Today’s report also showed the consumer-price index coming in softer than expected on a month-on-month basis as well as in its core reading. The dollar 1% and oil erased losses in the minutes after the data release.

In the US midterms, Republicans headed for control of the House by smaller margins than forecast while the race for Senate continued. That belied investors’ expectation of a GOP wave and a consequent Congress gridlock seen as positive for risk sentiment. Both the S&P 500 and Nasdaq 100 tumbled more than 2% on Wednesday.

The disappointment echoed in Asia Thursday. A gauge of Chinese technology stocks in Hong Kong lost more than 3%, with heavyweights Tencent Holdings Ltd. and Alibaba Group Holding Ltd. sliding ahead of their earnings next week. Mainland Chinese stocks also declined as the nation tightened Covid restrictions on some of its biggest cities, killing of expectations for a relaxation in its pandemic policy.

China’s Covid struggles also weighed on the demand outlook for oil, sending West Texas Intermediate crude futures slipping toward the $85-per-barrel mark.

This week’s brutal selloff in cryptocurrencies eased even though sentiment remained impaired as FTX.com stared at the possibility of a bankruptcy if a $8 billion rescue doesn’t come through. Bitcoin traded around $17,400 after the CPI report.

In early New York trading, Pinduoduo Inc. led Chinese shares higher after the nation’s leaders at a Politburo Standing Committee meeting chaired by President Xi Jinping called for more precise and targeted Covid control measures. Depositary shares of AstraZeneca Plc climbed as the drugmaker raised guidance after posting better-that-forecast quarterly results.

Key events this week:

US initial jobless claims, Thursday

Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday

US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

Futures on the S&P 500 rose 3% as of 8:41 a.m. New York time

Futures on the Nasdaq 100 rose 3.7%

Futures on the Dow Jones Industrial Average rose 2.4%

The Stoxx Europe 600 rose 2%

The MSCI World index rose 0.4%

Currencies

The Bloomberg Dollar Spot Index fell 1%

The euro rose 0.9% to $1.0097

The British pound rose 1.9% to $1.1570

The Japanese yen rose 1.6% to 144.08 per dollar

Cryptocurrencies

Bitcoin rose 9.4% to $17,210.72

Ether rose 15% to $1,272.56

Bonds

The yield on 10-year Treasuries declined 16 basis points to 3.93%

Germany’s 10-year yield declined 14 basis points to 2.04%

Britain’s 10-year yield declined 13 basis points to 3.32%

Commodities

West Texas Intermediate crude rose 1.2% to $86.87 a barrel

Gold futures rose 1.2% to $1,734.50 an ounce

–With assistance from Richard Henderson.

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