US Markets Consolidate Ahead of Inflation Data – Nasdaq up 0.3%
US Stock markets consolidated near recent highs as data pointed to a cooling economy and the prospect of rate cuts ahead of key inflation numbers tonight. The three main indexes all edged higher again, the Dow adding 0.11%, the S&P 0.07% with the Nasdaq leading the way with a 0.3% rise. US Treasury yields dropped after the data, the 2-year and the 10-year both losing 3 basis points to finish at 4.716% and 4.288% respectively. The dollar also dropped off recent highs, down 0.1% on the index, but remains near historic levels against the Yen with the intervention threat still high. Oil prices jumped on more geo-political concerns, both in Europe and the Middle East, Brent gaining 1.34% to $86.39 a barrel and WTI rising 1.04% to $81.74 a barrel. Gold prices also had a good day, jumping back 1.2% into recent more familiar ranges to close the session at $2,324 an ounce.
PCE Data to Trump Presidential Debate
And just like that we are back to financial markets analysts playing with a certain individuals name for headlines. The first US presidential debate kicks off this morning in the Asian session and although investors will keep a close eye on the proceedings, the content is very unlikely to be market moving. Much more pressing of course is tonight’s PCE inflation data in the states where investors will be hoping for the data to back up market pricing rather that then consistent more hawkish narrative we have been getting from Fed members. The risk does sit to the topside again with the market pricing in an expected 0.1% month-on-month increase, if we see anything above 0.3% then we could see some substantial corrective moves in the market. Current betting is around 60% for a September rate cut but this would be pushed much further out if we do get a topside surprise with stocks likely to take a hit and yields and the dollar to jump. Anything that confirms recent other data results that the economy is slowing will lead to those rate cut odds increasing and more potential gains in the stock market.
Inflation Data in Focus for Investors Today
There is more than one important inflation data print scheduled in today’s trading day but in all honesty the others will fall swiftly into the background once we approach the US open and the PCE data release. The Asian session see’s the release of the key Tokyo Core CPI number early in the day and this is followed by the US Presidential debate which is likely to keep traders amused rather than move markets too much, with most just hoping that both candidates manage to get through it without falling asleep or worse! There are key inflation numbers out of both France and Spain once Europe opens, but the focus for traders will swiftly turn to the New York open. Canadian GDP data is due out alongside the US PCE Price index data but expect the American data to dominate moves. Expectation is for a modest 0.1% month-on-month gain and anything significantly off this print will see big moves across all products as the market recalibrates rate expectations. Later in the day we also have the Chicago CPI number and the Revised University of Michigan Consumer Sentiment release to take us into the weekend.
