Stocks and Treasuries Find Relief Before CPI Print: Markets Wrap

(Bloomberg) — US stocks and Treasuries caught some respite as oil prices eased, with traders looking to August’s US inflation report for a clear signal on whether the Federal Reserve will hike interest rates next week.

After surging yields and a rally in crude left the S&P 500 facing its worst week since June, futures for the index rebounded 0.5%. Europe’s Stoxx 600 climbed by the same margin. Oracle Corp. jumped nearly 7% in early trading as its data center bets showed signs of paying off.

Brent fell toward $104 a barrel. While the benchmark remained on track for a nearly 9% jump since Monday, the International Energy Agency warned higher prices would hit consumption. Treasuries rose most at the short end. The dollar barely budged.

Traders are bracing for Friday’s inflation print at a time when worries over oil-driven price pressures have pushed global bond yields to the highest in years. Money markets price a 67% chance of a Fed hike next week.

Economists expect the consumer price index to have risen 0.4% in August, an acceleration from a month earlier, due in part to higher gasoline costs.

Stripping out the volatile energy and food components, the core CPI is projected to show a more moderate 0.2% increase.

“We had the Oracle numbers as a reminder that there’s a tech story that’s still very, very vibrant,” said Guy Miller at Zurich Insurance. “That’s what investors keep coming back to. We know for at least the next two quarters that earnings are going to be really robust.”

Markets in Asia echoed Thursday’s US moves. MSCI Inc.’s equity gauge for the region fell 1.3%. Australia’s three-year yield jumped as much as 20 basis points to 5.05%, its highest level since 2011, while New Zealand’s two-year yield climbed 25 basis points.

Turmoil in the Middle East remains a key driver for global markets. In the latest developments, Iran-backed Houthi militants in Yemen advanced toward Red Sea coastal areas bordering the Bab el-Mandeb Strait. A successful push could tighten their grip on the waterway and threaten deeper disruption to a second route for shipments from the region.

Crude’s inflationary impact was again evident in US diesel prices rising above $6 a gallon for the first time ever.

“Equity markets will most likely be driven by bond yields and oil prices for the coming days,” said Raphael Thuin at Tikehau Capital. “There is no panic at the moment, but one can feel some concerns rising on second-round inflation, even if we’re not there yet.”

While long-term yields are likely to continue to rise, strong earnings will help shield US stocks from a drawdown, said Kevin Thozet at Carmignac.

“Earnings growth expectations are such that they seem to be able to handle a rise in the cost of capital,” Thozet said. “We’re still quite confident and remain invested in the US stock market.”

Corporate Highlights:

Moonshot AI is targeting a manifold jump in annualized revenue to $2 billion by the end of the year, using the breakout success of its Kimi K3 model to dial up the heat on rivals from Anthropic PBC to Z.AI Co. Cybersecurity is the next big market for AI, with advances in the technology set to disrupt an industry geared to defending computer systems, said Nvidia Corp. Chief Executive Officer Jensen Huang. Oracle Corp.’s cloud computing business grew faster than analysts projected, signaling the company’s big bets on AI data center projects are paying off. Anthropic PBC accused China’s artificial intelligence champion Moonshot AI of covertly routing thousands of user requests to the US firm’s Claude models and passing off the responses as its own in a bid to gain an edge in the AI race. Microsoft Corp. plans to more than triple its data center capacity, an effort that could help the company overcome a computing shortage that has forced it to turn away some AI and cloud business. Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.5% as of 10:50 a.m. London time S&P 500 futures rose 0.5% Nasdaq 100 futures rose 0.6% Futures on the Dow Jones Industrial Average rose 0.5% The MSCI Asia Pacific Index fell 1.2% The MSCI Emerging Markets Index fell 1.2% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.1% to $1.1598 The Japanese yen rose 0.2% to 154.09 per dollar The offshore yuan was little changed at 6.7089 per dollar The British pound was little changed at $1.3509 Cryptocurrencies

Bitcoin fell 0.4% to $76,972.32 Ether rose 0.2% to $2,466.08 Bonds

The yield on 10-year Treasuries declined two basis points to 4.94% Germany’s 10-year yield was little changed at 3.50% Britain’s 10-year yield declined four basis points to 5.33% Commodities

Brent crude fell 3.3% to $104.13 a barrel Spot gold rose 0.6% to $4,343.91 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Sujata Rao.

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