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Equity futures fall on inflation data




Equity futures gave up on Wednesday after recent data showed that inflation slowed slightly in April.

Futures for the S&P 500 fell 0.6%, reversing a gain of more than 1% before the release of the data. The index took a three-day losing streak on Tuesday, pausing a stretch of pressure that came as investors prepared for the Federal Reserve to continue raising interest rates to curb decades of high inflation.

Futures for the Dow Jones Industrial Average fell 0.4% on Wednesday and futures for the technology-focused Nasdaq-100 fell 1.1%.

The yield on 10-year government bonds – which underpins borrowing costs throughout the economy – rose to 3.032% from 2.990%. Interest rates and bond prices are moving in opposite directions.

The consumer price index rose 8.3% in April from the same month a year ago, and declined from an annual rate of 8.5% in March, but above 8.1[ads1]% expected by economists. Lower annual inflation last month marks the first monthly easing in price increases since August 2021.

The path to inflation and wages will determine how much the Fed will raise interest rates at its next board meeting. Last week, the central bank raised interest rates by half a percentage point, the largest increase since 2000, and approved a plan to shrink its $ 9 trillion asset portfolio – and launch a higher yielding campaign to limit 40-year high inflation.

Shares, especially in the US, have been hit by a sell-off in recent weeks. Investors are struggling with the relaxation of simple monetary policy that had increased gains on equities and bonds since the early days of the pandemic.

Before the clock in New York, shares in Coinbase Global fell 15% after the cryptocurrency exchange said that users had fallen from the previous quarter. Shares in Unity Software plunged 23% before the market after the video game software developer increased its losses and provided revenue guidance for the second quarter below analysts’ expectations.

Switch rose 8.9% after the data service company said it was taken privately by a consortium of investors.

Traders worked on the floor of the New York Stock Exchange on Tuesday.


Photo:

BRENDAN MCDERMID / REUTERS

To increase investor uncertainty, the war in Ukraine, which has driven inflation even higher by raising commodity prices, and Covid-19 shutdowns in China are threatening to hurt the global economy.

“If we only had rising policy rates, or just had high inflation, or only had China or only had Ukraine, we could probably do it,” said Daniel Morris, marketing strategist at BNP Paribas Asset Management. “But we have it all at the same time. That’s why it’s such a particularly challenging environment.”

Morris said U.S. stocks could come under further pressure, saying valuations were down to average levels after being historically expensive before the sale.

Oil prices rose. Brent oil, the global benchmark index, rose 3.5% to $ 106.02 a barrel.

Overseas markets were generally higher. Stoxx Europe 600 rose 0.7%, led by shares in car and real estate companies. In Asia, Hong Kong’s Hang Seng rose 1% and the Shanghai Composite Index rose 0.8%.

Among individual European shares, Swedish Match rose around 9% after saying that the board had agreed to a takeover of Philip Morris International,

valued at the equivalent of $ 16 billion. The German industrial company Thyssenkrupp rose 12% after saying that higher steel prices would strengthen earnings for the rest of the year.

Write to Joe Wallace at joe.wallace@wsj.com

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