Investing.com – Wall Street appears to be starting the week with modest gains. The focus will be on the latest US inflation data as investors look for confirmation that the Federal Reserve will begin cutting interest rates in September. Quarterly earnings season is coming to an end, but the retail sector will be in the spotlight in the coming days.
1. July consumer price index
The future path of US interest rates remains the focus of investors’ attention, so Wednesday’s data release will be the week’s key economic indicator.
US Federal Reserve Governor Michelle Bowman noted a welcome improvement in inflation over the past couple of months in an interview on Saturday, toning down her usual tone but saying inflation remains uncomfortably above target 2% of the central bank.
At the end of July, the Fed kept the rate in the same range of 5.25-5.50% it has been in for more than a year, but indicated that a rate cut could come as early as September if inflation continues go down
July CPI data is expected to show that inflation continues to move closer to the Fed’s target of 2% for the year, with forecasts continuing towards annual core inflation falling to around 3.2%, the lowest since April 2021.
Fed funds futures suggest a 49% chance of a half-point rate cut in September, after hitting 100% last week.
2. Futures are increasing while inflation is the focus
US stock futures rose on Monday. Investors are cautious at the start of the week, which will include key inflation data as well as important earnings data for companies in the retail sector.
By 04:00 ET (0800 GMT), the contract was up 40 points, or 0.1%, up 11 points, or 0.2%, and up 60 points, or 0.3%.
Wall Street’s major indexes ended last week with modest losses, a rebound of sorts from a decline earlier in the week.
The data helped ease investor concerns about the strength of the labor market and the health of the US economy, and attention will now turn to the Federal Reserve’s second target: the consumer price index. [см. выше].
Investors will also have the opportunity to hear from several Fed officials, including the head of the Atlanta Fed, the head of the Philadelphia Fed and the head of the Chicago Fed.
Comments from three Fed policymakers on Thursday showed they were more confident that inflation had cooled enough to warrant a rate cut.
3. Earnings reporting season is coming to an end.
The quarterly earnings season is in its final stages and most companies have already reported their quarterly financial results.
However, there are several well-known US companies to report this week, including retail chains Home depot (NYSE:) and Walmart (NYSE:).
Investors will be watching to see what retailers have to say about the stability of consumer spending, which is a key driver of economic growth, especially as there are recent signs that weakness in economic data.
Other major companies reporting earnings include Cisco Systems (NASDAQ:) and Fox Corporation (NASDAQ:).
In Europe, Switzerland’s largest bank UBS (SIX:) will report earnings on Wednesday, while it will be a big week for the insurance sector: Hannover Re (OTC:), Aviva (LON:), NN Group (AS:) (NASDAQ:) and Admiral (LON:) are scheduled to file their reports.
Major Chinese Internet companies will also report their second-quarter results this week, including Tencent (HK:) Holdings (OTC:), Alibaba (NYSE:) Group and JD.com (NASDAQ:).
4. UK inflation is also under pressure
The economic data calendar is busy in the UK this week as investors look for clues as to whether the rate cut cycle will continue next month.
Earlier this month, the Bank of England cut rates for the first time since 2020, and the market now sees another quarter point rate cut as likely at its meeting in the -September at around 33%.
Data due on Tuesday, followed by data a day later, will be closely watched for signs of price pressure, particularly in the still-hot services sector.
Catherine Mann, an external member of the Bank of England’s Monetary Policy Committee, said in a podcast published on Monday that the prices of goods and services will rise again and it could take years for the pressure on wages in the economy to dissipate.
“There is an upward trend in the wage and price setting process, and it may be structural, having come at a time of very high inflation in the last two years. It will take a long time to get rid of this spurt,” she said.
Mann voted against cutting interest rates this month in a tough 5-4 decision.
5. Oil prices continue to rise
Crude oil prices rose on Monday, rising for the fifth straight session as worries about the US economy eased, while geopolitical tensions in the Middle East remained supportive of prices.
By 04:00 ET, the futures contract was up 0.9% at $77.55 a barrel, and the contract was up 0.7% at $80.25 a barrel.
Last week, the two oil benchmarks rose in price by more than 3%, the first positive week in the past 5 years.
Iran and Hezbollah have vowed to avenge the assassination of Hamas leader Ismail Haniyeh and Hezbollah military chief Fuad Shukr.
On Sunday, Axio reported that Israeli intelligence believes that Iran will attack Israel directly and within days.
Fears that a wider war in the Middle East will disrupt oil supplies from the commodity-rich sector have prompted traders to price the maximum risk of a rise in oil prices.
Encouraging economic data from the United States, suggesting that a recession in the world’s biggest fuel consumer may not be coming, helped the oil market last week.
2024-08-12 08:06:00
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