European stocks remain stable as investors wait for inflation data
European stocks remained stable, while Wall Street stock futures and US government bonds softened, as investors waited for expected inflation data on Friday that could push the Federal Reserve to rethink its policies ultra-flexible monetary instruments.
The Stoxx Europe 600 was up 0.2% at midday while the UK FTSE 100 was flat. Wall Street stock market futures signaled that the S&P 500 would drift 0.2% lower in early trades, while the top 100 tech-focused Nasdaq Composite stocks were expected to fall 0.3% .
Friday’s U.S. inflation survey is expected to show basic personal consumption spending, the Fed’s preferred measure of inflation that wipes out volatile food and energy prices, has risen by 2.9% year on year in April, its largest annual increase since 1993.
The 10-year US Treasury yield, which moves inversely to its price, added 0.02 percentage point to 1.589 percent.
Many economists believe inflation is being pushed up by temporary factors as industries reopen following closures due to a pandemic last year. But analysts and investors will be on the lookout for price hikes large enough to persuade the Fed to reverse its crisis monetary stimulus sooner than expected to calm an overheating economy.
“We’re probably going to see an increase in transitional elements,” said Samy Chaar, chief economist at private bank Lombard Odier. “Like hotels, cars, airfares, for example, which are in catch-up mode.”
The US job market may be a bigger barometer of long-term inflation, he added. “If the job market tightens, you get pressure on wages and that, at some point, fuels the pressure on prices as people adjust their consumption.”
Unemployment is 6.1 percent in the United States. Data later Thursday is expected to show new jobless claims fell to a new pandemic-era low of 425,000 last week. Higher unemployment benefits and virus fears have led to labor shortages and prompted some US companies to offer higher wages. A McDonald’s franchise in Florida offered payments of $ 50 to anyone who showed up for a job interview last month.
Meanwhile, Fed officials changed the tone of their communications, insisting that it was too early to discuss reducing the bank’s purchases of overdue bonds when launching a debate on the reduction. of its support to the markets in times of crisis.
Randal Quarles, vice chairman of the Fed, said on Wednesday that even after “discounting temporary factors”, the rise in US inflation since December “would prove sufficient” to justify a reduction in asset purchases later. in 2021.
In foreign currencies, the euro rose 0.1% against the dollar to buy $ 1.2205. The British pound rose 0.4% to $ 1.4178. The dollar index, which measures the greenback against major currencies, remained stable around its lowest point for 2021.
China’s onshore renminbi continued to advance against the dollar, rising 0.3%. One unit of the US currency now buys 6.3728 Rmb, the lowest amount for about three years.
Brent, the world’s benchmark for oil, fell 0.9% to $ 68.28 per barrel.