Futures edge higher ahead of inflation data

(Reuters) – U.S. stock index futures edged higher on Wednesday as investors awaited key inflation data and minutes from the Federal Reserves policy meeting for clues on whether U.S. interest rates are near their peak.

After a banking turmoil last month, investors are betting that the Fed will soon end its aggressive monetary tightening campaign and also start cutting rates in the back half of the year amid growing concerns of a recession.

The Labor Department data, which will be published at 8:30 a.m. ET (1230 GMT), is expected to show headline and core consumer prices in March eased to 0.2% and 0.4%, respectively, on a monthly basis.

But year-on-year, while consensus estimates call for a significant drop in the headline number, to 5.2% from 6.0%, the core measure, which strips out volatile food and energy prices, is expected to rise to 5.6% from 5.5%.

“The U.S. equity market and other assets are showing signs of pent-up volatility ahead of the March CPI report today, one of the final macro data points that can tilt the odds of the Fed moving ahead with another rate hike at the May 3 meeting or deciding to stand pat,” Saxo Bank strategists said.

Money market traders are pricing in a nearly 75% chance that the Fed will hike interest rates by 25 basis points at the end of its meeting in May, according to CME Groups Fedwatch tool.

US inflation, Fed rates and markets, https://fingfx.thomsonreuters.com/gfx/mkt/zgpobjnzyvd/Pasted%20image%201681292009856.png

Minutes from the U.S. central banks policy meeting in March will be watched closely by investors later in the day for fresh clues on the trajectory of interest rates. The Fed in March raised rates by 25 bps and signaled it was on the verge of pausing further rate hikes.

Beyond CPI, investors are awaiting the first-quarter earnings season, which begins in earnest on Friday with results from three major banks, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.

At 05:48 a.m. ET, Dow e-minis were up 64 points, or 0.19%, S&P 500 e-minis were up 5.25 points, or 0.13%, and Nasdaq 100 e-minis were up 8 points, or 0.06%.

National CineMedia Incs shares sank 19.9% in premarket trading after the biggest movie-theater advertising business in North America said it filed for bankruptcy protection and entered into a restructuring agreement with its lenders.

U.S.-listed shares of Chinese firms Alibaba Group Holding Ltd, Baidu Inc and JD.com Inc slipped almost 2% as investors weighed rising geopolitical tensions.

China plans to close the airspace north of Taiwan for about half an hour next week, down from an originally announced three days, because of a falling object from a satellite launch vehicle, officials in Taiwan and South Korea said.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)