Wall Street futures were mixed early Monday as traders look ahead to a fresh reading on U.S. inflation that could offer further hints on the future direction of interest rates. Major European markets were positive. TSX futures were little changed.
In the early premarket period, futures linked to the three key U.S. indexes all wavered around the break-even mark. All three are coming off a losing week. The Nasdaq fell more than 2 per cent last week while the S&P 500 recorded a weekly decline of 1.1 per cent.
The S&P/TSX Composite Index managed modest gains for the day on Friday but posted a weekly loss of 0.7 per cent, ending seven consecutive weeks of gains.
This week, the latest reading on U.S. inflation will be key for markets. The report is due tomorrow.
“Disinflation trends will get tested here and we could potentially have a major turning point with Wall Street’s expectations on how high the Fed will have to take interest rates,” OANDA senior analyst Craig Erlam said.
The report is expected to show that headline CPI rose 0.5 per cent on a monthly basis in January, following a 0.1-per-cent decline the month before. The annual rate of inflation in the U.S. is seen easing to 6.2 per cent from 6.5 per cent, Mr. Erlam said.
“If pricing pressures come in hotter-than-expected, this could be an inflation reckoning report that might drive Fed rate hike expectations above 5.25 per cent,” he said.
Canada’s January inflation report is due next week.
Later this week, investors will hear from Bank of Canada deputy governor Paul Beaudry. He will speak in Edmonton on Thursday on the importance of the central bank’s inflation target. The central bank has raised interest rates at its last eight meeting, looking to tame price pressures. At its most recent meeting in January, the bank raised borrowing costs by a quarter percentage point and signalled a conditional pause in further moves.
On the corporate side, Canadian investors will get quarterly results from Algoma Steel after markets close on Monday. Later in the week, TC Energy and Shopify are scheduled to release earnings reports.
On Wall Street, Coca-Cola, Cisco and Marriott are among the companies reporting results this week.
Overseas, the pan-European STOXX 600 was up 0.34 per cent in morning trading. Britain’s FTSE 100 advanced 0.28 per cent. Germany’s DAX and France’s CAC 40 gained 0.26 per cent and 0.59 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.88 per cent. The Japanese government is expected to formally appoint economist and former policy board member Kazuo Ueda as the next governor of the Bank of Japan on Tuesday. Hong Kong’s Hang Seng lost 0.12 per cent.
Crude prices were down in early trading with the demand picture coming into focus as traders await the U.S. inflation figures later in the week.
The day range on Brent was US$85.10 to US$86.64 in the early premarket period. The range on West Texas Intermediate was US$78.45 to US$80.
Both benchmarks were down about 1 per cent ahead of the North American open. Both rose more than 8 per cent last week, buoyed by news that Russia would cut production in response to price caps from the West.
Traders are waiting for Tuesday’s U.S. inflation numbers, hoping for clarity on where the Federal Reserve is headed on interest rates.
“Crude prices are softening as energy traders anticipate a potentially weakening crude demand outlook as a pivotal inflation report could force the Fed to tighten policy much more aggressively,” OANDA senior analyst Ed Moya said.
“This week could deliver a make or break moment in how bad of a recession Wall Street prices in,” he said.
Prices saw further downward pressure from news of the resumption of Azerbaijani oil exports on Sunday at Turkey’s Ceyhan terminal.
Reuters reports that the terminal had been damaged in the devastating earthquakes that hit Turkey and Syria last week. It is the storage and loading point for pipelines which carry oil from Azerbaijan and Iraq.
In other commodities, gold prices slid as the U.S. dollar edged higher.
Spot gold was down 0.3 per cent at US$1,859.86 per ounce early Monday morning. U.S. gold futures inched 0.1-per-cent lower to US$1,873.60.
The Canadian dollar was slightly lower while its U.S. counterpart edged up against a group of currencies.
The day range on the loonie was 74.69 US cents to 74.94 US cents in the early premarket period.
There were no major Canadian economic releases due Monday. Investors will get a flash estimate on factory sales as well as comments from the Bank of Canada later in the week.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, went as high as 103.8 in early trading, not far off its best level since early January, according to figures from Reuters.
The euro and pound were both steady on the day against the dollar, with the European common currency at US$1.0685 and sterling at US$1.206, Reuters reported.
In bonds, the yield on the U.S. 10-year note was down slightly at 3.736 per cent ahead of the North American opening bell.
(8:30 a.m. ET) Canadian construction investment for December.
With Reuters and The Canadian Press