US futures soar after inflation

Wednesday 10 August 2022 15:06

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US stock markets open sharply higher on Wednesday after better-than-expected inflation numbers.

S&P futures are 1.7 percent higher, and the Nasdaq even looks set to start 2.4 percent higher.

Consumer prices fell on a monthly basis last month after rising 1.3 percent in June. On an annual basis, prices rose by 8.5 percent, from 9.1 percent a month earlier.

“Hopefully the peak is over, it seems for now,” Rabobank market analyst Philip Marey said.

This is primarily due to the drop in energy prices, but used cars, for example, also became slightly cheaper, the analyst noted.

Core inflation, i.e. adjusted for food and energy prices, stood at 0.3 per cent on a monthly basis in July. On an annual basis, core inflation was 5.9 percent, compared to 5.9 percent a month earlier.

And the core prices, according to Rabobank, have the “hail” of how quickly they fall. Getting back to 2 percent will be a big challenge for the Federal Reserve, Marey predicts.

The biggest problem is the lack of a job market. “Participation is lagging behind, especially the elderly are no longer returning to the labor market. It is the supply side. If it recovers, wage pressure will fall and core inflation will also fall,” says Marey.

Immigration can be a solution to this, but it is a sensitive issue, he adds.

The next Fed rate meeting in September is still a long way off and more data is coming, but with today’s data, speculation of a 75 basis point rate hike is likely to ease and the market is back at 50 basis points, Marey believes. “It’s relatively aggressive, but not too aggressive.”

Inflation in China rose from 2.5 to 2.7 percent in July. Producer prices rose by 4.2 percent, which is significantly less than the 6.1 percent a month earlier. In both cases, the figure was lower than economists had expected.

Euro/dollar is trading at 1.0327 and the US 10-year yield is trading at 2.717 percent.

The oil stops. Weekly US oil figures are still on the agenda later this afternoon.

Company news

Elon Musk has sold nearly $7 billion worth of Tesla stock in the past few days. In a tweet, Musk explains that he has already sold these shares, so if he is forced to go through with the purchase of Twitter, he will not have to sell the shares at that time out of necessity. “It’s important to avoid a distress sale,” Musk said. KBC economist Tom Simonts quickly calculated that Musk has already sold $32 billion worth of Tesla stock in the past 10 months. Shares of Twitter appear to open more than 3 percent higher, and Tesla is even up 4.5 percent in pre-trade.

Disney’s numbers will be released after the market. This stock looks set to open 2.7 percent higher.

Lock positions

The Dow Jones index closed 0.2 percent lower on Tuesday at 32,774.41 points, and the broader S&P 500 index lost 0.4 percent at 4,122.47 points. Yesterday, the Nasdaq lost 1.2 percent to 12,493.93 points.

KBC Group’s share price is quoted live at € * with a difference %. Today’s highest price is € * with the low of € *.

The share price of Tesla Inc. quotes live on € * with a difference %. Today’s highest price is € * with the low of € *.

The Twitter share price is traded live at € * with a difference %. Today’s highest price is € * with the low of € *.

The share price of Twitter Inc. quotes live on € * with a difference %. Today’s highest price is € * with the low of € *.

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