LDN - Business

Futures edge higher ahead of key inflation data

[April 12, 2023] By Sruthi Shankar and Ankika Biswas

(Reuters) -U.S. stock index futures edged higher on Wednesday as investors awaited inflation data and minutes from the Federal Reserve's policy meeting for clues on whether U.S. interest rates are near their peak.

After a banking turmoil last month, investors are betting that the Fed will soon end its aggressive monetary tightening campaign and also start cutting rates in the back half of the year amid growing concerns of a recession.

The Labor Department data, which will be published at 8:30 a.m. ET (1230 GMT), is expected to show headline and core consumer prices in March eased to 0.2% and 0.4%, respectively, on a monthly basis.

But year-on-year, while consensus estimates call for a significant drop in the headline number, to 5.2% from 6.0%, the core measure, which strips out volatile food and energy prices, is expected to rise to 5.6% from 5.5%.

"The U.S. equity market and other assets are showing signs of pent-up volatility ahead of the March CPI report today, one of the final macro data points that can tilt the odds of the Fed moving ahead with another rate hike at the May 3 meeting or deciding to stand pat," Saxo Bank strategists said.

Money market traders are pricing in a nearly 72% chance that the Fed will hike interest rates by 25 basis points in May, according to CME Group's Fedwatch tool.

Minutes from the U.S. central bank's policy meeting in March will be watched closely by investors later in the day for fresh clues on the trajectory of interest rates. The Fed in March raised rates by 25 bps and signaled it was on the verge of pausing further rate hikes.

Also in focus will be remarks from Fed officials.

Minneapolis Fed President Neel Kashkari said on Tuesday that allowing inflation to stay high would be even worse for the labor market, while Chicago Fed President Austan Goolsbee said the U.S. central bank should be cautious about raising interest rates in the face of recent banking stress.

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Trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 30, 2023. REUTERS/Brendan McDermid/File Photo

Beyond CPI, investors are awaiting the first-quarter earnings season, which begins in earnest on Friday with results from three major banks, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.

At 6:44 a.m. ET, Dow e-minis were up 86 points, or 0.25%, S&P 500 e-minis were up 6.75 points, or 0.16%, and Nasdaq 100 e-minis were up 1.25 points, or 0.01%.

Major technology and other growth stocks such as Apple Inc, Alphabet Inc, Tesla Inc and Meta Platforms Inc edged lower in premarket trade tracking a rise in U.S. Treasury yields.

National CineMedia Inc's shares sank 20% after the biggest movie-theater advertising business in North America said it filed for bankruptcy protection and entered into a restructuring agreement with its lenders.

U.S.-listed shares of Chinese firms Alibaba Group Holding Ltd, Baidu Inc and JD.com Inc slipped between 0.5% and 2.0% as investors weighed rising geopolitical tensions.

China plans to close the airspace north of Taiwan for about half an hour next week, down from an originally announced three days, because of a falling object from a satellite launch vehicle, officials in Taiwan and South Korea said.

(Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta)

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