US Treasury yields and the USD fell, while US equity futures moved slightly higher extending gains from yesterday ahead of a key inflation report.
Oracle fell as much as 9.2% in premarket trading after the software company's second-quarter revenue disappointed as momentum in cloud sales slowed. Nasdaq futures, however, are overall still trading 0.2% higher for today and despite yesterday's sharp drop of the “Magnificent Seven” that are little changed today.
A day before the Federal Reserve's final rate decision of 2023, the consumer price index will be scrutinized for signs of a continuation of the disinflation trend. There is little chance for any surprise tomorrow with the Fed to keep rates at near 100% unchanged. For tomorrow's Fed rate decision it will be more important how Fed Chairman Jerome Powell will try (again) to dampen expectations for monetary easing – especially after investors have reacted very dovishly on his recent remarks.
As inflation slows down (=disinflation continues) it will be increasingly harder for Powell to convince the markets. The Fed (and likely also the Bank of England) will say that they remain data depended going forward.
The USD slightly weakened ahead of the CPI report and also yields edged lower showing that markets are expecting the disinflation (in the US) to continue
Stocks in Europe edged slightly higher supported by improving economic data and expectations that inflation continues to slow (back to 2% target). In the UK, yields fell and the GBP depreciated after wage growth slowed at the sharpest pace in almost two years. Signs of a cooling labor market shows that the UK economy continues to slow.
I expect US CPI data to come with little surprise. The headline US CPI number for November is forecast to decline to 3.1%, the lowest reading since the June print released in July. As inflation continues to slow (also core inflation), pressure on the Fed to keep monetary policies tight reduces – in combination with a still resilient US economy could further extend gains for now. I expect gains to continue for now as the inflation picture continues to improve. The market will not believe the potentially hawkish tone from Powell tomorrow.
The JPY recovers again after weakening yesterday. The markets continue to underestimate the recovery potential in the JPY in upcoming months.
Oil continues to see headwinds from weak natural gas prices and concerns about over supply. Oil saw slight gains after an attack on a tanker in the Red Sea. Gold can likely edge higher again – especially with more signs of cooling inflation. Also Bitcoin will be able to extend the rally (which saw a correction yesterday) as rate cut hopes will likely remain intact.
👁 ROB'S MARKET OVERVIEW:
⚠️ We expect US CPI data with little surprise – US disinflation continues
December 12, 2023
🌐/🇺🇸 Global/US Markets ➡️/↗️
Cyclical Stocks ➡️/↗️
Tech/Growth Stocks ↗️/↕️
Financial Stocks ➡️/↗️
Defensive Stocks ➡️
Energy Stocks ➡️
Materials Stocks ↗️/➡️
JPY, CHF ↗️
EUR, AUD ↗️/➡️
USD ↘️/➡️ (short-term headwinds as disinflation continues)
⚡️Cryptos ↕️/↗️ (can recover as disinflation continues)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)