- US CPI seen to increase for a fourth month, above 5%
- Bloomberg commodity benchmark hits decade high
- Bitcoin recovers
Key Events
US futures contracts on the Dow, S&P, NASDAQ and Russell 2000 as well as European stocks were in a holding pattern on Tuesday, ahead of the release of potentially catalytic US inflation figures today, just ahead of the US market open.
Oil continues to trade higher as another storm approaches the US Gulf Coast and OPEC raised its positive demand outlook for crude.
Global Financial Affairs
Energy-related stocks rallied in Asia and Europe, tracking oil prices which gained on concerns of another hurricane as well as forecasts from OPEC which anticipate demand to move above pre-pandemic levels by next year.
Tropical storm Nicholas is threatening the Gulf of Mexico, a key US oil hub, which was already hammered by Hurricane Ida just a few weeks ago. Producers there have yet to return to capacity after the first storm. Boosting oil yet further, the OPEC cartel is encouraged by improving vaccine rates and a returning trust in governments’ handling of the pandemic, which may increase travel.
In Europe the STOXX 600 Index edged lower, losing some of yesterday’s rebound after last week’s slump. In mirror image of the recent outperformance of defensive sectors, stocks of luxury retailers, such as LVMH (PA:LVMH), Kering (PA:PRTP) and Richemont (SIX:CFR) dropped 2.6%, 3.9% and 3.2% respectively. Jewellry maker Pandora (CSE:PNDORA), however, bucked the trend, jumping 3.7% after the company announced its intent to grow its sales by 6% - 8% in the years ahead.
The commodity-heavy FTSE 100 was pulled down by mining stocks despite industrial commodities, from aluminum to steel, extending rallies, with natural gas hitting new records in Europe. The Bloomberg Commodity Spot Index hit a decade high.
Source: Bloomberg
US inflation data is expected to rise for the fourth consecutive month. Today's release follows the New York Federal Reserve’s Survey of Consumer Expectations which found that consumers expect inflation over the next year to reach a median of 5.2% and a median of 4% over the next 3 years—both the highest on record since the data has been compiled from 2013.
The Fed and Wall Street are probably concerned that if people continue to see rising prices, they will begin asking for pay hikes, kick-starting a wage-price spiral. No one believes that will happen just yet, but these numbers are providing a reason to worry.
Treasury yields on the 10-year note edged higher, extending their range.
Yields are trading within a likely symmetrical triangle, bullish for Treasuries, within the falling channel in which rates have been trapped in since the March high, as well as after the Death Cross.
The dollar slid.
The greenback may be forming the right shoulder of a H&S top, after the pattern’s head traded above the Mar. 31 peak, briefly completing a massive double bottom.
In a mirror image to the USD, gold may be developing the right shoulder of a H&S bottom. The yellow metal might slide further if today's inflation figures are high.
The move would take the precious metal out of its falling channel, pushing to a potential, sizeable double-bottom.
Bitcoin rose within a pennant.
The cryptocurrency is presumably bearish after its crash last week. Note, the 50 and 200 DMAs’ convergence with the pennant, highlighting its significance on the chart.
Oil advanced for the third straight day.
The price is pushing against the neckline of a H&S bottom, having completed a bullish pennant, which helped the price escape a falling channel.
Up Ahead
- On Wednesday Canada releases CPI figures for August.
- US initial jobless claims are released on Thursday.
- On Friday, European CPI data for August is published.
Market Moves
Stocks
- The FTSE 100 fell 0.2%
- The STOXX 600 was little changed
- Futures on the S&P 500 were little changed
- Futures on the NASDAQ 100 were little changed
- Futures on the Dow Jones Industrial Average rose 0.1%
- The MSCI Asia Pacific Index fell 0.5%
- The MSCI Emerging Markets Index fell 0.6%
Currencies
- The British pound rose 0.2% to $1.3864
- The euro was little changed at $1.1819
- The Japanese yen was little changed at 110.05 per dollar
- The offshore yuan was little changed at 6.4423 per dollar
Bonds
- Britain’s 10-year yield advanced two basis points to 0.76%
- The yield on 10-year Treasuries was little changed at 1.33%
- Germany’s 10-year yield was little changed at -0.32%
Commodities
- Brent crude rose 0.6% to $73.97 a barrel
- Spot gold was little changed