U.S. Futures Fall as Market Focus Turns to Inflation Data

By Dow Jones Newswires Staff

U.S. equity futures slid in early European trade after a volatile session Tuesday, as investors await inflation data that will set the stage for a highly anticipated Federal Reserve policy decision next week.

Oil prices edged higher following a fresh round of strikes between the U.S. and Iran. The U.S. conducted three waves of attacks against Iranian air defense and radar sites in retaliation for the downing of a U.S. Apache helicopter, placing further pressure on an already fragile ceasefire.

Technology stocks in the U.S. looked set to extend Tuesday's losses after artificial intelligence-linked companies fell in Asia trade. Investors will parse fourth-quarter earnings from Oracle, set for release after market close Wednesday.

The dollar fell and U.S. Treasurys weakened slightly as investors eyed the key U.S. inflation data due for release later Wednesday. A hotter-than-expected CPI print for May could bolster the case for a Federal Reserve rate hike at Kevin Warsh's first meeting as Chair next week.

--In early European trading, Brent crude was up 0.4% to $91.84 a barrel, while WTI futures rose 0.2% to $88.38 a barrel. "The latest escalation threatens to prolong restrictions on traffic through the Strait of Hormuz, a critical route for global oil and gas exports, while declining U.S. crude inventories underscore tightening supply conditions," analysts at MUFG said. "Going forward, developments in US-Iran negotiations, security conditions around Hormuz, and the pace of inventory drawdown will be key drivers of oil market sentiment." Traders now await the latest data on U.S. crude stockpiles due later Wednesday.

--U.S. stock futures fell after stocks largely slipped Tuesday. Futures for the S&P 500 were down 0.3%, while futures for the Dow Jones Industrial Average declined 0.2%. The tech-heavy Nasdaq slipped 0.5%.

--Asian equities mostly retreated Wednesday as renewed U.S.-Iran tensions stoked fears of supply disruptions and prompted investors to pull capital from stock markets. South Korea's Kospi led the losses, falling 4.5%. Japan's Nikkei Stock Average was down 1.9%. China's Shanghai Composite Index dropped 0.4%.

--European indexes edged higher at market open in cautious early trade, as most sectors rose though software stocks continued their volatile run. The Europe-wide Stoxx 600 was 0.2% higher. London's FTSE 100 rose 0.2% as grocery stocks gained, though HSBC Holdings weighed on the index--down 1.9%. The French CAC 40 gained 0.3% as luxuries edged higher, with LVMH rising 0.8%. Germany's industrial-heavy DAX was up 0.2%. Software giant SAP fell 2.4%, though banks and autos rose. Italy's FTSE MIB advanced 0.6% as banks extended gains and cross-listed STMicroelectronics jumped 2.25% after heavy losses Tuesday. The tech-heavy AEX was up 0.3% in Amsterdam, even as semiconductor stocks struggled, with ASML nudging down 0.3%. Spain's IBEX 35 was up 0.4%.

--The dollar fell slightly as investors turned cautious ahead of U.S. inflation data. "This is an important one, because recent weeks have seen mounting speculation about a Federal Reserve rate hike," Deutsche Bank analysts said in a note. This was initially driven by the energy price shock but there have been three consecutive better-than-expected jobs reports, they say. The labor market side of the Fed's mandate seems increasingly secure, allowing it to focus on inflation, they said. The market is currently pricing in a quarter-point rate rise by year-end and another rate rise next year, LSEG data show. The data are due at 1230 GMT. The DXY dollar index fell 0.1% to 99.854.

--U.S. Treasury yields rose in Asian trade. Rather than fresh Middle East escalation, "the market is instead focusing on today's CPI figure, where the uncertainty about how the Federal Reserve will act with new leadership under Kevin Warsh increases the uncertainty," SEB's Gustav Helgesson said in a note. A high inflation outcome could lead to a new surge in market rates, a stronger dollar and continued pressure on global stock markets, the macro strategist said. The two-year Treasury yield rose 1.3 basis points to 4.135%, while the 10-year yield was up 0.8 basis points at 4.535%, according to Tradeweb.

--Bitcoin drops 1.2% to $61,372 after hitting a 20-month low of $59,125 Friday. Renewed geopolitical tensions can trigger selling in bitcoin as traders rush back into cash, dollar liquidity and traditional safe-haven assets, Zaye Capital Markets analyst Naeem Aslam said in a note.

--Precious metals slipped in early European trade. New York gold contracts fell 1.7% to $4,212.00 a troy ounce, while silver contracts slipped 1% to $64.58 an ounce.

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(END) Dow Jones Newswires

06-10-26 0434ET