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U.S. equity index futures rally
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U.S. Mar CPI MM YY < ests; core MM YY in-line with ests
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Euro STOXX 600 index up ~0.5%
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Dollar down; gold, crude, bitcoin up
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U.S. 10-Year Treasury yield falls to ~3.37%
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MORE TROUBLE AHEAD FOR TURKEY'S LIRA AS ELECTIONS LOOM [0907
EDT/1307 GMT]
Turkey's lira , the worst performing EM currency last
year with a 29% drop, is on track for another turbulent year as
presidential and parliamentary elections scheduled for May add
to uncertainty.
A measure of volatility in the lira hit its
highest level in nearly eight months after President Tayyip
Erdogan launched his re-election campaign on Tuesday.
Support for the president, however, has dipped slightly after February's devastating earthquake amid perceptions of an initially slow response.
Erdogan's unorthodox economic policies that have hobbled the lira and sent inflation surging in recent years have added to concerns. Polls and analysts foresee a tight race, with some seeing the main opposition alliance and their candidate CHP leader Kemal Kilicdaroglu holding a slight lead against the long-reigning president. "It is reasonable to assume that if Erdogan and his AKP win, the incentive to keep the lira stable – or at least prevent its excessive depreciation – by spending billions of dollars in backdoor FX interventions will be significantly weaker allowing the lira to trade far more freely," said Piotr Matys, senior FX analyst at In Touch Capital Markets. "If the opposition wins, the key question is whether the transition of power will be relatively smooth or perhaps the Erdogan administration comes up with a long list of arguments to question the outcome and refusing to release power after governing for two decades." The lira has fallen nearly 3% since the start of the new year, hitting a fresh record low of 19.448 against the dollar last week after HSBC revised its end-year forecast for the lira to 24 per dollar from 21 previously. The lira is expected to fall about another 15% to 22.5 against the dollar in a year, according to a recent Reuters poll. "Regardless of the election outcome, we think Turkey will need to undergo a rebalancing before long, involving a large currency depreciation," said economists at Capital Economics, in a recent note. (Bansari Mayur Kamdar)
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U.S. STOCK FUTURES PUFF UP AS HEADLINE CPI COOLS (0900 EDT/1300 GMT) U.S. equity index futures have strengthened in the wake of the release of the latest data on U.S. inflation. The March CPI on a month-over-month and year-over-year basis came in below estimates, as well as below the prior month's readings. The month-over-month core number and year-over-year print were in-line with estimates:
According to the CME's FedWatch Tool, the probability of a 25 basis point rate hike at the May 2-3 FOMC meeting is now 67% from 76% just before the numbers were released. There is now around a 33% chance that the FOMC will leave rates unchanged from around 24% prior to the data coming out. Indeed, the cooling headline numbers appear to be raising hopes that the Federal Reserve could hit pause on its interest rate hiking cycle soon. CME e-mini S&P 500 futures are gaining around 0.7%. The futures were just above flat in the moments before the numbers came out.
All S&P 500 sector SPDR ETFs are higher in premarket trade
with consumer discretionary and real estate posting the biggest gains. XLY is up 1.5%, while XLRE is rising
1.4%.
Regarding the inflation data, Quincy Krosby, chief global
strategist at LPL Financial in Charlotte, North Carolina, said,
"It was cooler than expectations by just a bit. Clearly the
inflationary pressures are moving in the right direction. The
initial reaction in the market was positive across the board.
You saw the futures market jump higher and the 2-year Treasury
yield moved lower on the release of this report."
Here is a premarket snapshot just shortly before 0900 EDT:
(Terence Gabriel, Caroline Valetkevitch)
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
