US Stocks Edge Higher on Trade Hopes – Nasdaq up 0.3%
US stock markets edged higher in trading yesterday as investors digested trade updates from President Trump that included more negotiations with the EU but also threats to Russia and buyers of Russian oil if a ceasefire in Ukraine doesn’t materialize. The Dow added 0.20%, the S&P rose 0.14%, while the Nasdaq pushed 0.27% higher. US Treasury yields pushed further north ahead of today’s inflation numbers, the 2-year up 1.5 basis points to 3.900% and the 10-year up 2.4 basis points to 4.433%. The dollar also notched up gains against the majors, with the DXY up 0.27% to 98.10, its highest level this month. Oil prices took a hit on Trump’s Russia threats, Brent down 1.80% to $69.09, WTI down 2.34% to $66.85 a barrel. Gold pushed higher as geopolitical concerns increased, up 0.36% to $3,342.90 an ounce.
US Inflation Data in Focus Today
With just fifteen days to go until the next Federal Reserve Bank rate announcement, all eyes will be on key US inflation data later today. Both the headline CPI and core monthly numbers are expected to show a 0.3% increase today, while the year-on-year numbers are expected to indicate an increase of 2.6%, up from 2.4% last month. The market is now pricing in a 95% likelihood that the Fed will keep rates on hold again at the next meeting, but a 60% chance that they cut in September; however, those odds could change sharply if we see a print off those expectations. FX traders are expecting to see some big moves in the dollar if we do get any deviation from expectations. Anything further north could see a continuation of the recent recovery rally that the greenback has experienced as rate cut expectations are pushed further out, while a softening of the data would make that September cut much more likely and could see the dollar look to explore annual lows again against most of the majors.
Busy Calendar Day for Traders Ahead
Investor focus is set to move off geopolitical concerns and back to fundamentals today with some key data due out across all three trading sessions, although traders will be keeping a close eye on any trade updates later in the day. The Asian session will see a strong focus on Chinese markets with a big data drop due midway through the day; the highlights are likely to be the GDP (exp +5.1%), Industrial Production (exp +5.6%), and Retail Sales (exp +5.2%) numbers. The London session sees the release of the monthly German ZEW Economic Sentiment data (exp 50.8), but the big numbers will come shortly after the New York open. Inflation numbers are due out of both the US and Canada, with the US data set to dominate. Canadian CPI (exp +0.1%) could see some moves in the loonie, but really the US numbers, CPI (exp +0.3%) and Core CPI (exp +0.3%), will dominate market sentiment.
