Market Report: Investors eye up US inflation data as Wall Street hits new highs
Derren Nathan, head of equity research, Hargreaves Lansdown: “The FTSE 100 is set to open flat after a third consecutive day of losses, with the index now sitting around 1.4% below last week’s record close. There’s been little in the way of economic or corporate catalysts in either direction this week.
US stocks however reached fresh highs yesterday, after second quarter GDP growth numbers were revised upwards to 3.3% from an initial estimate of 3.0%. The tech-heavy NASDAQ Composite posted the biggest rise of the major indices, rising 0.5% despite a small dip in the value of AI titan NVIDIA as investors took stock of its latest set of forecast-beating numbers.
Donald Trump’s efforts to oust Federal Reserve governor Lisa Cook over allegations of mortgage fraud has entered a new chapter after she filed a lawsuit requesting that the court declares the move ‘unlawful and void’. Meanwhile, one of the more doveish of the central bank’s governors, Christopher Waller, has been flying the flag for further rate cuts, pledging support for a quarter-point cut at the September meeting and calling for further reductions in due course in a bid to bring rates to a more ‘neutral’ stance of around 3%.
Markets are pricing in around a high probability of a cut by the Fed next month, and today’s PCE inflation numbers will be a key data point for monetary policy setters. On an annualised basis, core PCE in July is expected to have risen from 2.8% to 2.9% compared to the Fed target of 2.0%. Markets are keeping a close eye on the impact of tariffs on the prices of goods and services. If inflation comes in hotter than expected, the path towards a drop in US borrowing costs in December will become a little less clear.
Brent crude oil prices are broadly unmoved at $67.7 per barrel. Oversupply continues to be in focus but the potential for tighter sanctions on Russian exports are providing some support. On the demand side seasonal weakness could compound the impact of any excess production in the coming quarters.”