A look at the day ahead from Saikat Chatterjee.
Global stocks are nursing losses after a selloff in U.S. cyclical stocks spread to the wider market with benchmark indexes closing nearly 1% down as inflation concerns continued to dominate investors minds.
Those concerns bubbled up in Bank of America’s May fund manager survey with an inflation surge perceived by investors as the biggest “tail risk” in the markets. In contrast, the pandemic was the biggest concern for most of last year followed by fears of a taper tantrum in March.
Commodity currencies, European and U.S. stock futures all point lower ahead of Federal Reserve minutes later this session.
The account of the Fed’s last meeting should reiterate the view that a recent rise in inflation would be transient and that the Fed should keep its easy monetary policy settings.
Broadly mixed economic data also failed to lift sentiment. Positive earnings from U.S. retail giants Walmart and Home Depot were countered by a 9.5% drop in housing starts in April to 1.569m.
Fears of inflation kept inflation gauges in the bond market elevated with 10-year U.S. inflation benchmarks holding near eight-year highs. Across the Atlantic, UK inflation more than doubled in April to 1.5% from a month earlier.
And while 10-year U.S. Treasury yields steady around 1.65% , Germany’s Bund yield is pushing closer to 0% . A gauge of the dollar’s value against its rivals traded near the lowest level this year.
Cryptocurrencies retreated further after China banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.
Bitcoin dropped as much as 10% to hit its lowest level since early February while smaller rival ether has now lost a third of its value from a record peak last Wednesday.
In corporate news, Julius Baer said it was on track to deliver on financial targets as the Swiss wealth manager posted an 8% rise in assets under management for the first four months of 2021 to 470 billion Swiss francs ($523.9 billion).
Key developments that should provide more direction to markets on Wednesday:
– Canada inflation data
– Fed April meeting minutes
– Fed speakers: Bullard, Bostic
– ECB’s Lane, de Cos to speak
– Germany to sell 10-year bonds
(Reporting by Saikat Chatterjee;)
