Stocks, U.S. Futures Dip as Inflation Risk Bubbles: Markets Wrap

(Bloomberg) — Stocks and U.S. equity futures fell Tuesday, as traders focused on the risks that rising energy costs will keep inflation elevated and signs of a widening regulatory scrutiny by China.

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European equities slumped at the open, with cyclical industries including banks, auto-parts makers and miners faring the worst. Futures on the S&P 500 and Nasdaq 100 fell less than 0.5%. MSCI Inc.’s Asia-Pacific index snapped a three-day climb amid news that China is expanding its crackdown to banks.

Oil held above $80 a barrel amid a power crisis from Europe to Asia. China’s thermal coal futures surged to a record for a second day. The energy crunch is squeezing supplies of aluminum, whose price hit a 13-year high.

“With commodity prices seeing another spike and inflation concerns resurfacing, investors moved to price in a more hawkish central bank reaction,” according to Deutsche Bank AG strategist Jim Reid.

Global markets are struggling to shake off worries that inflation — spurred by an energy crunch and pandemic-related supply-chain snarls — will sap company profits and economic expansion. Financial firms this week will kick off the third-quarter earnings season, heralding a key test of investor confidence.

Upcoming reports on the U.S. consumer-price index and retail sales will help inform expectations about the likely timeline for Federal Reserve tapering and any eventual rate hikes.

Elsewhere, a rally in Bitcoin paused at about the $57,000 level.

U.S. benchmark Treasury yields and the dollar were steady.

Here are a few events to watch this week:

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• Atlanta Fed President Raphael Bostic speaks on inflation Tuesday

• U.S. FOMC minutes and CPI Wednesday

• China PPI, CPI Thursday

• U.S. initial jobless claims, PPI Thursday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.6% as of 8:43 a.m. London time

• Futures on the S&P 500 fell 0.4%

• Futures on the Nasdaq 100 fell 0.3%

• Futures on the Dow Jones Industrial Average fell 0.4%

• The MSCI Asia Pacific Index fell 0.9%

• The MSCI Emerging Markets Index fell 1.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1561

• The Japanese yen was little changed at 113.22 per dollar

• The offshore yuan was little changed at 6.4600 per dollar

• The British pound was little changed at $1.3596

Bonds

• The yield on 10-year Treasuries was little changed at 1.60%

• Germany’s 10-year yield was little changed at -0.13%

• Britain’s 10-year yield declined one basis point to 1.18%

Commodities

• Brent crude was little changed

• Spot gold rose 0.3% to $1,759.25 an ounce

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