Europe Futures Rise, US-Led Airstrikes Boost Oil: Markets Wrap

(Bloomberg) — European equity futures are pointing to a strong start on Friday in line with their Asian counterparts. Oil climbed on tensions in the Middle East.

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Euro Stoxx 50 contracts rose 0.7%, while their US counterparts declined ahead of producer price data. Some of the biggest US banks are set to kick off the earnings-reporting cycle for Corporate America. Asia stocks are on track for a weekly gain, supported by a rally in Japan. Shares in China, Hong Kong and Australia fluctuated, while South Korea’s declined.

Brent crude rose as much as 2.5% to above $79 a barrel after the US and its allies launched joint military strikes against Houthi rebels in Yemen following their attacks on ships in the Red Sea. The news of airstrikes also pushed gold and stocks of Asian shipping companies higher.

“We might see crude stacking on another dollar or two,” said Vandana Hari, founder of consultancy Vanda Insights. “The fluctuations in prices will absolutely remain in place as the situation develops. It’s an uneven tug of war between a bearish outlook on fundamentals and a supportive Mideast risk premium.”

Commodity-linked currencies benefited from the rise in crude oil, with the Australian dollar and Norwegian krone gaining. Bloomberg’s gauge of the dollar dipped, suggesting global traders were mostly unfazed by the escalation.

Treasuries were a tad lower Friday after the 10-year yield fell six basis points on Thursday and the policy-sensitive two-year yield dropped by around 11 basis points.

US consumer price index data Thursday showed headline prices increased more than expected in December, while core inflation fell — although less than consensus estimates. Swaps pricing for a cut by March increased slightly on the day, back toward levels seen at the end of 2023.

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Federal Reserve Bank of Cleveland President Loretta Mester pushed back against the prospect of a March rate cut and said the inflation figures showed policymakers had further work to do.

Wells Fargo recommends investors should start positioning for a sudden risk-off move as markets are too optimistic the Federal Reserve will cut in March.

Later Friday, JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. will report fourth-quarter results after a gauge of US bank stocks gained 23% last quarter, trouncing the broader market.

In Asia, Japan’s November current account balance came in below forecasts. Also, the country’s benchmark two-year government bond yield dropped to zero for the first time since August and an auction of 30-year sovereign bonds saw weaker demand than expected amid speculation the Japanese central bank will tweak its monetary policy at a meeting this month.

READ: China Investors’ Zeal for Japan Spurs Spike in ETF Premiums

China’s consumer prices fell for a third straight month in December, a sign of weak domestic demand. That may justify the need for China’s central bank to cut a key policy rate and pump more cash into the financial system on Monday.

Elsewhere, more than $4 billion of shares traded between the 11 US spot Bitcoin exchange-traded funds on Thursday following Securities and Exchange Commission approval for the funds. Bitcoin was steady near $46,000.

Key events this week:

• UK industrial production, Friday

• US PPI, Friday

• Some of the biggest US banks report fourth-quarter results, Friday

• Minneapolis Fed President Neel Kashkari speaks, Friday

• ECB chief economist Philip Lane speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 6:42 a.m. London time

• Nasdaq 100 futures fell 0.1%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 0.5%

• The MSCI Emerging Markets Index was little changed

• S&P 500 futures fell 0.2%

• S&P/ASX 200 futures fell 0.3%

• Hong Kong’s Hang Seng fell 0.3%

• The Shanghai Composite was little changed

• Euro Stoxx 50 futures rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0975

• The Japanese yen rose 0.1% to 145.10 per dollar

• The offshore yuan was little changed at 7.1724 per dollar

• The British pound was little changed at $1.2771

Cryptocurrencies

• Bitcoin rose 0.1% to $46,224.88

• Ether rose 0.6% to $2,619.26

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.98%

• Germany’s 10-year yield advanced two basis points to 2.24%

• Britain’s 10-year yield advanced two basis points to 3.84%

• Australia’s 10-year yield declined three basis points to 4.07%

Commodities

• Spot gold rose 0.3% to $2,035.27 an ounce

• West Texas Intermediate crude rose 2.4% to $73.78 a barrel

• Spot gold rose 0.3% to $2,035.27 an ounce

This story was produced with the assistance of Bloomberg Automation.

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