Stock futures little changed amid earnings rush
U.S. stock index futures were little changed on Wednesday as investors focused on quarterly earnings, a day after the Dow Jones Industrial Average and the Nasdaq hit record highs. More than half of the S&P 500 companies have reported results so far, with their combined earnings estimated to have risen 8.2 percent – the most in nine quarters. Key companies scheduled to report results on Wednesday include Goodyear Tire, life insurer Prudential Financial and grocer Whole Foods. The dollar edged up 0.3 percent, but gold rose to a three-month high as political uncertainty ahead of European elections kept the safe-haven asset in favour. Oil prices fell 0.3 percent, extending losses to the third day as an increase in U.S. crude inventories and a slump in Chinese demand implied that global oil markets remain oversupplied despite OPEC-led efforts to cut output.
France, Italy bond yield spreads over Germany hit fresh multi-year highs
Italian and French 10-year government bond yield spreads over Germany hit fresh multi-year highs on Wednesday as investors continued to fret about political risks in Europe. The gap between France’s 10-year government bond yield and the German 10-year bond yield – the benchmark for the region – rose to 78.8 basis points, the highest since November 2012. The yield on Italy’s 10-year government bond, meanwhile, rose to 201.8 basis points over Germany, higher than any closing price since February 2014. "The ongoing elevated political headline risk is governing much of the spread tone in widening (French) OAT-Bund spreads," Citi analysts said in a note.
China says risks from cross-border capital flows under control
China’s foreign exchange regulator said on Wednesday that risks from cross-border capital flows will be generally under control in 2017, a day after the country reported that its forex reserves had fallen to near six-year lows. Chinese authorities have taken a raft of steps in recent months to curb capital flight from the country to support its weakening yuan currency, while trying to bring in more foreign investment. The crackdown may have slowed outflows in January, but China’s forex reserves unexpectedly fell below the closely watched $3 trillion level, sowing doubts over how much longer authorities can afford to defend both the currency and its reserves.
Brazil inflation slows, fuelling rate cut expectations
Consumer prices in Brazil rose less than expected in January for the fifth straight month, adding to the anticipation of a series of steep interest rate cuts by the central bank. The benchmark IPCA price index rose 0.38 percent in January, the lowest for the month since the real was created in 1994, government statistics agency IBGE said on Wednesday. Economists had expected a 0.44 percent gain, according to the median estimates in a Reuters poll. Prices rose 5.35 percent in the 12 months through January, down from an increase of 6.29 percent in the previous month and below economists’ expectations of 5.41 percent. Yields on interest rate futures were down in early trading. The surprisingly abrupt slowdown in inflation has prompted the central bank to cut interest rates closer to single digits, boosting confidence among consumers and businesses after two years of a deep recession.