Mon, Oct 03, 2022 @ 15:48 GMT
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US Open: Wall Street Jumps as Inflation Eases

US stocks open higher after softer inflation causes investors to reassess the likelihood of a sooner move by the Fed.

US futures

  • Dow futures +0.35% at 34988
  • S&P futures +0.36% at 4486
  • Nasdaq futures +0.35% at 15490

In Europe

  • FTSE -0.14% at 7060
  • Dax +0.3% at 15751
  • Euro Stoxx +0.15% at 4180

Stocks jump as bets of a move by the Fed ease

US stocks are set to open firmly higher following the weaker than expected inflation data. Consumer prices rose at a slower pace than expected in August prompting bets that peak inflation could have passed.

CPI rose 5.3% YoY in August, down from 5.4% in July. On a monthly basis headline CPI rose 0.3%, down from 0.5% and below the 0.4% forecast.

In core CPI the slowdown was even more evident with Core CPI rising 4% down from 4.3% and below forecasts of 4.2%.

The softer inflation prints caused investors to push back on bets that the Fed could move sooner to taper bond purchases. Easing inflation would take the heats off the Fed to move prematurely. PPI data for August also rose at a slower pace so the evidence does appear to be building that peal inflation has passed. That said, supply chain bottle necks are expected to persist for a while so its unlikely that either PPI or CPI will drop dramatically or rapidly.

As bets of the Fed tightening policy eased, stocks have jumped and the US Dollar has fallen steeply.

Where next for the Dow Jones?

The Dow is once again making a move towards the 50 sma, After rejection yesterday another attempt could see the index retake this key support turned resistance. Any recovery needs to retake the 50 sma at 35070 and horizontal resistance at 35180 for the buyers to gain traction. On the downside a break below the 100 sma could potentially spark a more significant selloff.

FX – USD tanks, GBP rises post jobs data

The US Dollar is plunging following the weaker inflation print.

GBP/USD the pound is pushing higher after encouraging UK labour market data. The data revealed that the number of employees on UK payrolls is back at pre-pandemic levels. The number of job vacancies rose 35% to 1 million. This suggests that the labour market can absorb the furloughed workers as the scheme winds down, prompting speculation of a sooner move by the BoE to hike interest rates.

  • GBP/USD +0.44% at 1.3898
  • EUR/USD +0.23% at 1.1837

Oil rises on US output concerns, IEA outlook

Oil prices are pushing higher trading around 6 week high as concerns over supply in the US continue to underpin the price. Supply hasn’t recovered from Hurricane Ida and is bracing for more hurricane disruption.

On the demand side, the IEA sees a 1.6-million-barrel demand rebound in October which is then expected to continue growing until the end of the year. Although the IEA did lower their global oil forecast for 2021 as a whole.

OPEC last week said they see demand easing in the final quarter but picking up to pr-pandemic levels in 2022.

  • Brent trades +0.4% at $73.51

Looking ahead

  • 21:30 API crude stockpiles
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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