(Bloomberg) — Stocks extended gains ahead of Thursday’s highly anticipated inflation report, seen as key to shaping expectations for the Federal Reserve’s interest-rate path this year.
Futures for the S&P 500 rose 0.2% after back-to-back all-time highs. European stocks climbed 0.3%, led by construction and retail shares. The dollar firmed. Treasuries held steady, with the 10-year yield at 4.04%.
Expectations that the Fed will resume monetary easing this month have soared in recent weeks, as data increasingly point to a US labor market under strain. Wednesday’s surprise decline in producer inflation further bolstered the view that tariffs are not placing excessive pressure on prices.
Core CPI, a measure of underlying inflation excluding food and fuel, likely rose 0.3% for a second month, according to the median estimate in a Bloomberg survey. Money markets are currently betting on as many as three quarter-point cuts by December, with some wagers pointing to a jumbo 50-basis-point reduction when the Fed meets next week.
A softer-than-expected print could fuel bets on an initial outsized cut, while a stronger reading would bolster the case for more gradual moves.
“Even if we do have a bit of a bump in CPI, there is a theory that it can be short-term, driven by tariffs,” said Nataliia Lipikhina, head of EMEA equity strategy at JPMorgan Private Bank. “As long as it is not such a big increase, I don’t think you’ll see a very big negative reaction on the market.”
Earlier Thursday in Asia, Chinese stocks capped their biggest advance since March, led by companies seen as major beneficiaries of the nation’s push for homegrown technology. MSCI’s Asia-Pacific index was little changed after five days of gains.
The prevailing bullish sentiment carries the risk of a volatility comeback. Strategists warn that after one of the strongest rallies in decades, a measure of caution is warranted, especially with stretched positioning, the aggressive pricing in of rate cuts and the seasonally weak September-October period.
“The market has been steadily pricing in a Goldilocks scenario where soft data was perceived positively — ‘bad is good’ — as long as it improved the odds of rate cuts,” said JPMorgan strategists led by Dubravko Lakos-Bujas. After a weak payroll print, “the ‘bad has become less good.’ If inflation comes in hotter this week, we see the current Goldilocks market positioning at risk of correcting.”
Policymakers at the European Central Bank are expected to keep rates unchanged later on Thursday, with analysts seeing no further cuts this cycle. Economists expect fresh quarterly projections to temper fears about inflation being lodged below 2%.
In commodity markets, Brent crude slipped toward $67 a barrel on forecasts for a record surplus next year. While the International Energy Agency raised projections slightly for global oil demand through 2026, it lifted supply estimates even more.
Corporate News:
Citigroup Inc.’s chief executive officer said merger activity is rebounding as US companies gain confidence from clearer policy signals, with a recession in the world’s largest economy looking unlikely. Billionaire Gautam Adani’s efforts to get US fraud charges against him resolved have stalled, according to people familiar with the matter, prolonging the regulatory overhang that has hobbled the Adani Group’s global expansion plans. Tricolor Holdings, a used car seller and subprime lender that focuses on undocumented immigrants in the US Southwest, filed to liquidate in bankruptcy. US prosecutors are also looking into allegations of fraud. Alibaba Group Holding Ltd. is leading a fundraising spree among Chinese tech giants, driven by soaring capital demands amid intensifying competition in artificial intelligence. SMG Swiss Marketplace Group’s shareholders are looking to raise as much as 903 million Swiss francs ($1.1 billion) in an initial public offering, which would mark one of Europe’s largest so far this year. Swedish financial services group NOBA Bank Group AB announced plans to launch an initial public offering in Stockholm, bringing new momentum to Europe’s busiest exchange for first-time share sales this year. Buyout firm GTCR is nearing a deal to buy generic drugmaker Zentiva in a deal that could be valued at about $4.8 billion, according to people familiar with the matter.
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 6:45 a.m. New York time Nasdaq 100 futures rose 0.3% Futures on the Dow Jones Industrial Average rose 0.2% The Stoxx Europe 600 rose 0.3% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro was little changed at $1.1685 The British pound fell 0.1% to $1.3509 The Japanese yen fell 0.4% to 147.98 per dollar Cryptocurrencies
Bitcoin rose 0.4% to $114,076.39 Ether rose 2.1% to $4,420.81 Bonds
The yield on 10-year Treasuries was little changed at 4.04% Germany’s 10-year yield was little changed at 2.66% Britain’s 10-year yield was little changed at 4.62% Commodities
West Texas Intermediate crude fell 0.9% to $63.12 a barrel Spot gold fell 0.5% to $3,622.71 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Msika.
(A previous version of the story corrected the day reference for producer inflation.)
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