US pre-open: Futures fall on rising bond yields, oil prices

A surge in oil prices and bond yields pushed US stock futures into the red on Wednesday as concerns about inflation returned to markets and dampened risk appetite.

In pre-market trade in New York, futures on the Nasdaq were down 0.4%, the S&P 500 fell 0.3% while the Dow slipped 0.2%.

Investors were digesting a raft of economic data this week which showed that the global recovery is far from over, with closely watched purchasing managers' indices (PMIs) across China, Europe and the UK showing that economic activity worsened in August.

"For markets, there is a difficulty knowing whether to treat economic weakness as a cause for concern or a reason for optimism gives potential implications for inflation and monetary policy," said Joshua Mahony, analyst at Scope Markets.

Meanwhile, oil prices were trading close to their 2023 highs after Tuesday's surprise news of voluntary production cuts in Saudi Arabia and Russia, as OPEC+ nations attempt to tighten market conditions to keep prices elevated. Crude was above $90 a barrel for the first time since November.

“If central bankers thought energy prices were an area they could relax on a bit, then the move higher through June has firmly disabused them of that notion,” said AJ Bell investment director Russ Mould.

“The extension of output cuts by Russia and Saudi Arabia through to the end of the year has helped oil prices regain the $90 per barrel mantle for the first time in 2023 and this is likely to add to inflationary pressures. It may force the likes of the Federal Reserve to keep interest rates higher for longer and this is helping to undercut the more comfortable narrative that the trajectory for rates is on the way to shifting."

The 10-year US Treasury yield jumped on Tuesday to 4.267% as it continues to trade near multi-year highs.

In US economic data on Wednesday, the trade deficit and ISM services PMI will be released after the opening bell.