Stocks fluctuated as investors weighed the prospect of large interest rate hikes by the Federal Reserve. Treasury yields and the dollar edged higher.

European stocks and US futures were little changed after the S&P 500 closed in the green thanks to dip buyers late in the session. Banks outperformed, while utilities slumped. The MSCI Asia Pacific Index reversed earlier gains as China dragged the region lower.

Traders remain focused on US economic data, with a decline in producer prices there providing some relief after the jolt from consumer-price figures saw wagers for rate increases ratchet higher. Retail sales due Thursday and University of Michigan readings Friday will be parsed for clues on the strength of the economy and inflation expectations.

“I think you want to begin to add risk back into your portfolio,” Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments said on Bloomberg TV. “I do think, despite the CPI number we got the day before yesterday, we are approaching or at peak inflation, and historically it has always been appropriate and good for your portfolio if you added to equities when we hit peak inflation.”

Swaps traders are pricing in a 75 basis point hike when the Fed meets next week, with some wagers appearing for a full-point move. The continued rise in rate-sensitive Treasuries deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century.

While the magnitude of the stock rout was impressive following hot US inflation data, the S&P 500 only reversed most of the gains made in the previous four sessions. The lack of a surge in the VIX index — known as the “fear gauge” — suggests that the selloff was a recalibration of those expectations rather than panic selling.

Asian currencies remained at risk from a strong greenback. The yen weakened on Thursday to trade around 143.75 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.

Crude oil fluctuated amid optimism for demand, with China easing Covid restrictions in the megacity of Chengdu. Natural gas increased again as traders weighed if Europe’s steps to contain the energy crisis will be enough to curb costs of the fuel after a price cap proposal was ditched for lack of consensus. Gold fell.

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Here are some key events to watch this week:

US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
Euro area CPI, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:

Stocks
The Stoxx Europe 600 rose 0.2% as of 8:05 a.m. London time
Futures on the S&P 500 rose 0.1%
Futures on the Nasdaq 100 were little changed
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 1.8%
The MSCI Emerging Markets Index fell 1.8%

Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.2% to $0.9961
The Japanese yen fell 0.5% to 143.75 per dollar
The offshore yuan was little changed at 6.9777 per dollar
The British pound fell 0.1% to $1.1524

Bonds
The yield on 10-year Treasuries advanced four basis points to 3.44%
Germany’s 10-year yield advanced four basis points to 1.75%
Britain’s 10-year yield advanced five basis points to 3.18%

Commodities
Brent crude fell 0.2% to $93.95 a barrel
Spot gold fell 0.6% to $1,687.36 an ounce

SOURCE :- bloomberg