Quiet Start to the Trading Week – Nasdaq up 0.3%
It was a relatively quiet start to the trading week yesterday, as market holidays, a quiet event calendar, and few geopolitical updates combined to keep markets largely rangebound. The three major US stock indices all closed close to flat: the Dow down just 0.01%, the S&P up 0.09%, and the Nasdaq rising 0.31%. The dollar eased lower over the course of the day, with the DXY down 0.18% to 99.02, and Treasury yields softened—the 2-year down 3.3 basis points to 4.004% and the 10-year down 3.2 basis points to 4.474%. Oil prices pushed higher again to hit multi-week highs as US–China trade talks continued, with Brent up 0.95% to $67.09 and WTI up 1.24% to $65.38. Gold also finished higher after an initial dip, closing up 0.44% at $3,324.92 an ounce.
US Inflation Data in Focus This Week
Key US inflation data is due out this week, and analysts will be paying close attention to the prints with regard to any pending rate cuts from the Federal Reserve Bank. Friday’s job numbers came in slightly higher than expected, and so Fed doves will be hoping for weaker inflation data this week to push up rate cut expectations. CPI data will take center stage on Wednesday, with the headline month-on-month number expected to show a 0.2% increase, the core data a 0.3% increase, and the year-on-year rising to 2.5%. PPI numbers are due out on Thursday, with expectations in line with CPI numbers—PPI at +0.2% and the core at +0.3%. There is no expectation of a cut at this month’s meeting, with a ‘hold’ now 99.9% priced in and only a 14% chance of a cut priced in for July, but September is now looking a stronger bet with a 54% expectation of a rate cut then. However, most analysts agree that we will need to see a softening of the data sooner rather than later if we are to see more action from the Fed in the next quarter.
Trade Talks and UK Data in Focus Today
Continuing trade talks between the United States and China will remain a focus for traders in the latter sessions of the day, with the potential for large moves likely on any updates. The Asian session has little in the way of tier-one events scheduled; however, investor focus will turn to UK markets early in the European session, with key employment data due out. The headline Claimant Count number is expected to show a 9.5k increase in claims, with the Unemployment Rate increasing to 4.6%, and any deviation will see strong moves for the pound. The trade talks between the US and China are taking place in London, so traders will be glued to news screens throughout the European and US day. The New York session has little in the way of data releases, but we are scheduled to hear from President Trump at the end of the day, which could add volatility to markets.
