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U.S. stock futures weaken before inflation data

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LONDON (Reuters) – U.S. stock futures were pointing to a lower Wall Street open as global stocks edged down on Wednesday ahead of U.S. inflation data, with buoyant oil prices fuelling unease about price pressures.

FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 8, 2021. REUTERS/Brendan McDermid

The U.S. consumer price index for October is predicted in a Reuters poll of economists to come in at an annualised +4.3% on the closely watched core measure, versus the U.S. Federal Reserve’s average annual 2% inflation target.

“We know inflation is high right now. Equity markets don’t expect it to stay too high for too long,” said Seema Shah, chief strategist at Principal Global Investors.

The mood could change if there were signs that inflation pressures went beyond supply chain concerns, she added.

Brent and U.S. crude futures hit two-week highs around $85 a barrel after industry data showed U.S. crude stocks unexpectedly fell last week. They later pared gains ahead of U.S. Energy Information Administration (EIA) oil inventory data. [O/R]

The MSCI global equity index fell 0.13% and S&P 500 futures were down 0.3% after Wall Street closed lower on Tuesday, ending a multi-day rally of consecutive record closing highs as the end of a consensus-beating earnings season comes into view.

“Rising inflation doesn’t seem to sour the market mood as much as it did a couple of months earlier, as investors are well conscious that the Fed will continue turning a blind eye on the problem,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

Shares in Tesla Inc edged higher following a two-day rout that saw the electric-car maker shed as much as $200 billion in market capitalisation.

The selloff was spurred by company chief Elon Musk’s poll over the weekend asking his Twitter followers if he should sell 10% of his stake in the company. Nearly 58% said they supported a sale.

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European stocks dipped 0.18%, moving away from recent record highs, though Britain’s FTSE 100 index rose 0.45%, partly on stronger energy stocks.

In Asia – where another inflation warning came from Chinese factory gate prices rising at their fastest clip in a quarter century – MSCI’s broadest index of Asia-Pacific shares outside Japan reversed earlier losses to gain 0.1%.

Cash-strapped China Evergrande Group teetered again on the precipice of default as it faced a final deadline to make an offshore bond coupon payment on Wednesday.

Shares in Chinese property developer Fantasia Holdings fell as much as 50%, before recouping some losses, after a six-week trading halt as the company warned it might not be able to meet its debt obligations.

Oxford Economics analysts said they expected China’s property downturn to be “contained” but added that “with shifting demographics, high numbers of empty apartments, and some big property developers being heavily over-leveraged, China’s huge property sector could crash more heavily”.

Hong Kong stocks also recovered ground, gaining 0.74% after earlier hitting a one-month low.

Japan’s Nikkei fell 0.6%, hurt by the rising cost of raw materials.

The dollar gained 0.31% against the safe-haven yen to 113.22 after hitting a one-month low on Tuesday, while the euro fell 0.39% to $1.1548. The dollar index was up 0.36% at 94.31.

The benchmark 10-year U.S. Treasury yield picked up 3.4 basis points to 1.4830% after it touched a six-week low of 1.4150% on Tuesday.

Euro zone bond yields also ticked up, with Germany’s 10-year yield, the benchmark for the bloc, up 1.1 basis points at -0.282%, above the seven-week low of -0.299% touched on Tuesday. [GVD/EUR]

Brent crude futures were steady at $84.76 a barrel, after rising 1.6% on Tuesday. U.S. West Texas Intermediate (WTI) crude futures dropped 0.42% to $83.80 a barrel, following Tuesday’s 2.7% gain.

Gold and Bitcoin have been the primary beneficiaries of the market turbulence, with gold up about 3.5% in a week to $1,824 an ounce and Bitcoin at $66,643 after hitting a record of $68,564 a day ago.

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