(Bloomberg) — U.S. futures edged lower and Treasury yields extended gains ahead of a key Federal Reserve meeting at which officials will deliver their outlook for the economy amid a budding recovery that risks stoking inflation.
Contracts on the S&P 500 traded modestly down, while those on the Nasdaq dropped 0.8%. Fuel-cell firm Plug Power Inc. plunged more than 20% in pre-market trading after it disclosed accounting errors. The Stoxx Europe 600 Index fell, and South Korean stocks retreated as Samsung Electronics Co. warned it’s grappling with the fallout from a “serious imbalance” in semiconductors globally.
The Fed’s policy and outlook updates due Wednesday take center stage as the global recovery gains traction. The Treasury 10-year yield hit 1.66% heading into day two of the Fed’s meeting, after a 20-year bond auction drew strong demand. Market-implied inflation expectations are at 12-year highs. The dollar edged higher versus most major peers.
Rates markets are positioned for the Fed to raise borrowing costs sooner than current guidance suggests. Higher inflation expectations have boosted bond yields and sparked a rotation from growth to value stocks. Bond investor Bill Gross predicted in a Bloomberg TV interview that inflation will rise to 3% to 4% in the coming months.
“The concern is the assets that have worked best over the last decade — rates, credit of all kinds and long-duration equities — may not be the only games in town any more,” said David Wong, investment strategist at AllianceBernstein.
Elsewhere, WTI crude oil reversed a gain after the IEA said markets aren’t on the verge of a new price supercycle. Bitcoin held at about $55,000, below the weekend record above $61,000.
These are some key events this week:
Fed Chair Jerome Powell will likely reaffirm his steady policy stance at the Fed policy meeting Wednesday.Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.
These are the main moves in markets:
Stocks
Futures on the S&P 500 Index fell 0.2% as of 7:30 a.m. New York time.The Stoxx Europe 600 Index decreased 0.5%.The MSCI Asia Pacific Index fell 0.3%.The MSCI Emerging Market Index fell 0.6%.
Currencies
The Bloomberg Dollar Spot Index jumped 0.2%.The euro dipped 0.1% to $1.1896.The British pound gained 0.1% to $1.39.The onshore yuan was little changed at 6.505 per dollar.The Japanese yen weakened 0.2% to 109.20 per dollar.
Bonds
The yield on 10-year Treasuries advanced four basis points to 1.66%.The yield on two-year Treasuries increased one basis point to 0.16%.Germany’s 10-year yield gained two basis points to -0.32%.Britain’s 10-year yield jumped five basis points to 0.835%.Japan’s 10-year yield decreased less than one basis point to 0.1%.
Commodities
West Texas Intermediate crude dipped 0.9% to $64.23 a barrel.Brent crude fell 1.1% to $67.65 a barrel.Gold weakened 0.2% to $1,728.29 an ounce.
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