Stocks stuck, oil sags as US inflation, debt woes loom
Stocks have been lethargic and oil has slid ahead of United States consumer price data that could damage hopes for interest rate cuts later this year, while President Joe Biden's failure to break a deadlock on the debt ceiling has also dampened markets.
Europe's benchmark STOXX index fell 0.3 per cent, echoing a decline in MSCI's broadest index of Asia-Pacific shares outside Japan, and S&P 500 futures also sagged.
The sour mood in European stocks came despite an uplift from the financial sector, where expectation-beating earnings from Credit Agricole helped banks be the top sectoral gainers on the STOXX 600.
Oil prices also sagged, ending a three-day rally, with Brent crude down $US1 ($A1.5) as US inventories rose in a possible sign of weakening demand.
April US consumer price data is due at 1230 GMT and economists expect the headline CPI to hold steady at an annual 5.0 per cent and core CPI to moderate very slightly to 5.5 per cent, although anything stickier could confound bets interest rates will fall.
"That's the thing that'd get taken out if CPI numbers come in on the higher side," ING economist Rob Carnell said.
"It doesn't look particularly sensible if inflation is falling at too slow a rate and that could feed through into higher longer-term treasury yields as well."
Interest rate futures imply about a 60 per cent chance the Federal Reserve cuts rates in September, according to the CME FedWatch tool.
Treasuries were broadly steady, with brinkmanship over the approaching US debt ceiling fuelling demand for safe assets, including bonds, on one hand, while also driving investors out of T-bills maturing in early June.
President Joe Biden and top MPs failed to break a deadlock over raising the $US31.4 ($A46.4) trillion US debt limit, but vowed to meet again before June, when the Treasury projects it will start struggling to meet its obligations.
Benchmark 10-year yields held at 3.529 per cent.
Two-year yields were at 4.049 per cent.
Foreign exchange markets have been treading water while markets weigh policymakers' rhetoric against traders' conviction that US interest rates, and the dollar, should fall.
Emerging markets currencies were subdued on Wednesday, with MSCI's index flat as investors awaited direction from the US data.
JP Morgan's G7 FX volatility index sat at a one-year low .
European Central Bank board member Isabel Schnabel said on Tuesday expectations for rate cuts were misplaced, but that didn't give the euro much of a boost, as traders have been reluctant to sell dollars too hard ahead of the CPI data.
China's weak import figures for April held down Chinese and Hong Kong stocks for a second straight session, as investors fret the market rebound from the reopening of the economy is fading into an uneven recovery.
Hong Kong's Hang Seng fell 0.5 per cent.
The Shanghai Composite dropped 1.3 per cent and the yuan fell to a two-week trough.
An apparent crackdown on due diligence firms is roiling the sector and unnerving investors.
Reuters reported CICC Capital, a unit of leading Chinese investment bank China International Capital Corp stopped using consultancy Capvision.
Brent crude futures hovered at $US76.90 ($A113.72) a barrel.
Gold is starting to settle in above $US2,000 ($A2,958) an ounce, while bitcoin steadied at $US27,732 ($A41,009).