U.S. equity futures waver, treasuries stabilize

U.S. index futures dipped and stocks in Europe erased gains as investors took stock of the outlook for monetary policy ahead of key inflation data later this week. Treasuries and the dollar were stable, though the rout in European sovereign bonds deepened.

U.S. index futures dipped and stocks in Europe erased gains as investors took stock of the outlook for monetary policy ahead of key inflation data later this week. Treasuries and the dollar were stable, though the rout in European sovereign bonds deepened.

The Stoxx Europe 600 index fluctuated after its longest streak of weekly losses in almost a year. S&P 500 and Nasdaq 100 contracts were lower following Friday’s bounce on Wall Street. Peloton Interactive Inc. soared in premarket trading after reports that it’s exploring takeover options. 

The 10-year Treasury yield was little changed near a two-year high, while European yields climbed. Riskier European debt -- which benefited most from pandemic-era stimulus -- felt the pressure, with yields on Greek 10-year securities jumping 26 basis points and those for Italy, Spain and Portugal also rising. The dollar was little changed, and the euro snapped a six-day strengthening run. A rally in crude oil stalled around US$92 a barrel.

Investors are grappling with the prospect of the steepest monetary tightening cycle since the 1990s, with markets pricing in more than five quarter-point Federal Reserve interest-rate hikes in 2022 following a strong U.S. jobs report. The U.S. inflation report this week could lead to more market volatility. A reading north of 7 per cent, the highest since the early 1980s, is expected.

“The repricing of Fed rate hikes has lost momentum as investors await more clarity on the impact of the pandemic and soaring energy prices on the U.S. and Fed outlook,” Credit Agricole strategists including Valentin Marinov wrote in a note. “Looking ahead, focus will be on the U.S. CPI and the January Fed minutes. it would take fairly positive inflation surprises and hawkish FOMC signals to revive the dollar rally in the near term.”