Wall Street markets remain cautious ahead of U.S. inflation data

Wall Street markets remain cautious ahead of U.S. inflation data

Fed speakers, U.S. bank earnings and PPI in focus, U.S. bank earnings and PPI gaining market share.

LONDON, Oct 14 Reuters: World markets failed to focus on rising inflation on Thursday as banks rebooted global equity and stocks, oil and gas prices burned up again but dollar and benchmark government bond yields stalled.

Record high Chinese factory gate inflation data overnight, ahead of U.S. producer figures later, meant the price pressure theme was very much alive, but the reaction from traders was looking more nuanced.

The dollar, driven to a higher than one-year high this week by growing bets on a growth of U.S. interest rates in 2022, eased for a second day in a row alongside the 10-year US Treasury yield, which tends to drive global borrowing costs?

Europe's STOXX 600 index also climbed to its highest point of the month as investors put aside recent caution. Wall Street futures added 0.5% even as analysts digested a big bank earnings from Bank of America Citigroup and Morgan Stanley.

Our take on central banks are going to look through the inflationary effects of energy prices, said Kiran Ganesh, managing director of multi asset & security at UBS Global Wealth Management.

Individual central bank governors are sounding a bit more cautious in our economic outlook, but we are not going to see substantial rate hikes, Ganesh added, predicting it wouldn't end up morphing into stagnant growth and high inflation - either.

The largest growth names including Facebook, Microsoft Amazon and Apple as well as Google all rose about 1% in Pre Opening Bell Jokeying as their recent bounce looks set to continue.

MSCI's Asian index rose 0.6% in its fifth gain in six sessions overnight too. Japan's Nikkei climbed 1.4%, although china's property company shares suffered more losses in Shanghai as the China Evergrande crisis continued to rumble.

On the commodity and foreign exchange markets we heard mixed signals. Gold, often seen as hedge against rising inflation, steadied after enjoying its best session on Wednesday in seven months.

Oil bulls pushed Brent crude back towards $85 a barrel. Natural gas climbed 2%, having already soared more than 150% this year, driving the spike in global energy prices. Bitcoin, sometimes purchased in a capacity of inflation hedge, rose to an all-time high of $58,550 in five months.

The dollar, meanwhile, pulled back to its nine-day low, allowing the likes of the Euro, British pound, and Australian and New Zealand dollars to all get back up.

Expectations the US Federal Reserve will tighten U.S. monetary policy more quickly than previously assumed saw the greenback hit a more than year high on Monday, but it is now down for October.

There is a bit of bounce for the euro, a bit more bounce for the pound and the biggest bouncer is the Kiwi dollars, so it's a “G 10 FX beta rally” for the Turkey Lira after the country's President ousted another batch of central bankers, said Societe Generale's Kit Juckes.

U.S. initial jobless claims and producer price inflation data are also due shortly, which will feed the inflation and Fed rate hike debates further?

It seems to be a classic case of sell the rumours buy the fact type mentality, said Neil Jones, head of FX sales at Mizuho, about the dollar dip. The Fed confirmed the expectations of many investors, I would suggest, holding long dollar positions.