Asian equities rallied, but maintained their recent trading range Thursday as investors focused on US inflation data and the risk of a surprise surge that could prompt the Federal Reserve to begin cutting massive stimulus.
In early European trading, Euro Stoxx 50 futures for the entire region gained 0.52%, while German DAX futures rose 0.1%, as did London FTSE futures. US stock futures, the S&P 500 e-minis, were up 0.32%.
The broadest Asia Pacific stock index outside Japan, MSCI (.MIAPJ0000PUS), rose to 703.7, but remained in the 698-712 range that it has traded since late May.
The Japanese Nikkei (.N225) rose 0.3%, while the benchmark Australia (.AXJO) closed 0.6%. China Shares Up On 0.6% Blue Chip Index (.CSI300) Increase
The fixed-income markets played a big role overnight, with some analysts pointing to a pullback in the US stimulus boost, while others speculated that US government bond shorts could be closed ahead of the May CPI. read more
Treasury short positions were the highest since 2018, according to JP Morgan’s positioning data last week.
The yield on 10-year US Treasuries fell to 1.4891% from 1.528% on Tuesday. A drop below 1.47% will push the yield down to its lowest since March 4.
There have also been speculations that hedge funds may have changed their bond allocation due to lower bond market volatility lately, analysts said.
On Wall Street, the S&P 500 (.SPX) index overnight approached its all-time high of May as major tech stocks rallied in tandem with health care stocks but ended up 0.1% lower. The Dow (.DJI) fell 0.44% and the Nasdaq Composite (.IXIC) fell 0.09%.
Markets are awaiting a European Central Bank (ECB) policy meeting later in the day, at which it will likely leave its policy recommendations unchanged and release updated macroeconomic forecasts for the euro area.
Also later on this global day, data is expected to show that the US CPI rose 0.4% in May, reaching an annualized rate of 3.4%, according to a Reuters poll.
“A significant surprise in the form of rising inflation may tip the Fed cuts debate sooner rather than later, although most will still seek significant progress towards maximum employment before considering a cut,” economists at ANZ write.
However, for now, “the market agrees with the Fed’s opinion that the rise in prices is temporary and the Fed will not change its policy directives at the FOMC meeting next week,” they added.
Analysts believe the data will be key to gold, as subsequent fears of price cuts could diminish the yellow metal’s luster.
US gold futures fell 0.3% to $ 1,889.50 an ounce.
Oil prices fell as data on inventories in the United States, the world’s largest consumer of oil, showed a rise in gasoline inventories, which indicated weaker-than-expected fuel demand in early summer, the peak season for the auto industry in the country.
Brent crude oil futures fell 51 cents to $ 71.71 a barrel, while US crude oil futures fell 46 cents to $ 69.50 a barrel.
Foreign exchange activity was muted, with the dollar remaining flat against the yen at 109.55.
The euro was slightly weaker at $ 1.2162 ahead of the ECB meeting, while the British pound fell to $ 1.4105. The Australian dollar and New Zealand dollar remained virtually unchanged.
As a result, the dollar index strengthened slightly at 90.197.
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