U.S. futures held steady following a report that inflation eased slightly last month but remains elevated, posing a challenge for the Federal Reserve at a delicate moment for the financial system.

Even though prices are rising faster than the Fed wants, some economists expect the central bank to suspend its yearlong streak of interest rate hikes when it meets next week. With the collapse of two large banks since Friday fueling anxiety about other regional banks, the Fed may, at least in the short term, focus more on boosting confidence in the financial system than on its long-term drive to tame inflation.

Futures for the Dow were up 0.8% before the bell Tuesday, while futures for the S&P rose 1%.

The government said Tuesday that prices increased 0.4% last month, less than January’s 0.5% rise. But excluding volatile food and energy costs, core prices rose 0.5% last month, slightly higher than January’s 0.4% gain. The Fed is particularly focused on the core measure as a gauge of underlying inflation pressures.

European markets rebounded Tuesday after a broad retreat in Asia as investors watched to see what’s next following the second- and third-largest bank failures in U.S. history.

Bank shares in Europe steadied, showing only modest losses. The STOXX Banks index comprising 21 leading European lenders dipped 0.8%, following steep plunges Monday that had some banks down more than 10% in intraday trading.

Bank shares stabilized following statements late Monday by the head of the group of finance ministers for the 20-country eurozone, Paschal Donohoe, that Europe had “no direct exposure” to Silicon Valley Bank in the U.S.

While risks outside the U.S. appear limited, the collapses of Silicon Valley Bank and Signature Bank have shaken confidence in the industry at a time when the Federal Reserve and other central banks are struggling to fine-tune policies to crush stubborn inflation without snuffing out post-pandemic economic recoveries.

Worries over a possible spreading of risks throughout financial systems have been countered, however, by hopes that the Fed might slow its interest rate hikes to relieve pressures on markets.

At midday, France’s CAC 40 rose 0.9%, Germany’s DAX added 1.1% and Britain’s FTSE 100 inched up 0.3%.

In Asian trading Tuesday, Japan’s benchmark Nikkei 225 dropped 2.2% to finish at 27,222.04, extending losses from the day before.

Japanese officials have insisted that the impact on the country’s banks from troubles in the U.S. industry would likely be limited. But bank shares plunged.

Australia’s S&P/ASX 200 dipped 1.4% to 7,008.90. South Korea’s Kospi fell 2.6% to 2,348.97. Hong Kong’s Hang Seng fell 2.3% to 19,247.96. The Shanghai Composite declined 0.7% to 3,245.31.

“There is escalating tension in the global financial world; this is despite non-U.S. banks’ exposure to U.S. regional banks being minimal, with the global systems being well capitalized and flush with liquidity,” Stephen Innes, managing partner at SPI Asset Management, said in a report.

“U.S. financial stress could lead banks of all stripes to retrench lending to the real economy and tighten broader financial conditions, amplifying risk to the broader markets,” Innes said.

President Joe Biden has moved aggressively to assure the public that the crisis is contained after the government announced a plan late Sunday meant to shore up confidence in banks.

Pressures persist, however, especially for regional banks smaller in size to the “too-big-to-fail” banks that foundered in 2007 and 2008.

The collapse of Silicon Valley Bank also has rattled the technology industry that was its backbone. Shell-shocked entrepreneurs got a government reprieve that saved their money, but the bank’s failure means that startups will have an even tougher time raising money after technology stock values fell and interest rates surged, causing venture capitalists to retrench.

Some investors are hoping the Fed will cut interest rates soon to help the bleeding and boost markets. The wider expectation, though, is that the central bank will pause or at least hold off on accelerating its rate hikes at its next meeting later this month.

That would still be a sharp turnaround from expectations just a week ago, when many traders were forecasting the Fed could go back to increasing the size of its rate hikes to tame stubbornly high inflation.

Higher interest rates can drag down inflation by slowing the economy, but they raise the risk of a recession later on. They also hit prices for stocks, as well as bonds sitting in investors’ portfolios.

In energy trading, benchmark U.S. crude fell $1.44 to $73.36 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost $1.29 to $79.48 a barrel.

In currency trading, the U.S. dollar rose to 134.02 Japanese yen from 133.20 yen. The euro cost $1.0748 up slightly from $1.0734.

On Monday, the S&P 500 dipped 0.2% and the Dow industrials fell 0.3%.

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