European stocks faltered and government bond yields edged higher, ahead of data later Thursday that is expected to show US inflation jumped to a new 40-year high last month.
Europe’s Stoxx 600 index rose in early trades before losing 0.1%, after closing 1.7% higher in the previous session. London’s FTSE 100 traded flat. Futures tracking Wall Street‘s S&P 500 index and the tech-heavy Nasdaq 100 fell 0.2% and 0.4%, respectively.
Meanwhile, government bond yields – which fall as their prices rise – have risen. The sovereign debt market had rebounded on Wednesday after a selloff earlier in the week, fueled by fears that the US Federal Reserve and European Central Bank were raising rates more aggressively than expected to fight rising prices.
The yield on the 10-year German Bund, which last month traded in positive territory for the first time since 2019, rose 0.02 percentage points to 0.241%. The yield on Italian 10-year bonds – considered particularly sensitive to rising rates due to high government debt – rose 0.04 percentage points to 1.81%.
Across the Atlantic, the 10-year US Treasury yield gained 0.01 percentage point to 1.94%.
Investors will learn later today the pace at which U.S. inflation rose in January, with economists predicting consumer price index data to show annual growth of 7.3%, the highest value since 1982.
Mike Zigmont, head of trading and research at Harvest Volatility Management, said the headline figure would provide “fundamental catalyst for a strong push up or down” in stock markets that have been swinging for weeks.
Jim Paulsen, chief investment strategist at The Leuthold Group, said the coming months of inflation data were “likely to be hot” given the very weak price gains a year ago, although he expects prices to fall later in the year due to these base effects. filter comparisons.
“By April. . . the delayed effect of more restrictive policies should begin to dampen inflationary forces,” Paulsen said in a note, referring to the Fed’s planned withdrawal of monetary stimulus.
If, however, January inflation figures are higher than expected, central bankers could come under renewed pressure to tighten financial conditions ever faster over the course of 2022. Investors are pricing in five rate hikes from the Fed’s share by the end of the year.
Patrick Spencer, vice president of equities at RW Baird, said Thursday’s inflation would be among “the most watched CPIs in history” given its implications for central bank policy.
Brent, the international oil benchmark, rose 0.6% to $92.07 a barrel, remaining around its highest level since 2014.