Tame Inflation Data May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with the futures moving to the upside following the release of the Labor Department’s highly anticipated report on consumer price inflation.

The advance by the futures came after the Labor Department report showed consumer prices increased by slightly less than expected in the month of August.

The Labor Department said its consumer price index rose by 0.3 percent in August after climbing by 0.5 percent in July. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices inched up by just 0.1 percent in August after rising by 0.3 percent in July. Economists had been expecting another 0.3 percent increase.

The report also showed a slowdown in the annual rate of consumer price growth, which dipped to 5.3 percent in August from 5.4 percent in July.

The annual rate of core consumer price growth also slowed to 4.0 percent in August from 4.3 percent in the previous month.

The relatively tame inflation data may ease concerns that the Federal Reserve will be pressured into scaling back stimulus sooner than hoped.

The Fed is scheduled to hold a monetary policy meeting next week, with many expecting the central bank to provide an update on the outlook for its asset purchase program.

With officials indicating inflation has reached a level consistent with tapering asset purchases, some traders worry the Fed could jump the gun amid signs of a slowdown in economic momentum.

Stocks moved mostly higher during trading on Monday, with the Dow and the S&P 500 both snapping five-session losing streaks. The Nasdaq bucked the uptrend, however, as the tech-heavy index closed lower for the fourth straight session.

The Dow climbed 261.91 points or 0.8 percent to 34,869.63 and the S&P 500 rose 10.15 points or 0.2 percent to 4,468.73. Meanwhile, the Nasdaq climbed off its worst levels but still edged down 9.91 points or 0.1 percent to 15,105.58.

The strength on Wall Street came as traders went bargain hunting following the downward move seen over the past several sessions.

The Dow ended last Friday’s trading at its lowest closing level in well over a month, down 2.9 percent from the record closing high set in mid-August.

A lack of major U.S. economic kept some traders on the sidelines ahead of the release of reports on consumer prices, industrial production and retail sales in the coming days.

Energy stocks saw substantial strength on the day, benefiting from a notable increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 4.2 percent, the NYSE Arca Oil Index spiked by 3.4 percent and the NYSE Arca Natural Gas Index surged up by 2.5 percent.

Significant strength was also visible among airline stocks, as reflected by the 2.5 percent jump by the NYSE Arca Airline Index.

Gold, banking and telecom stocks also saw notable strength on the day, while tobacco stocks extended a recent sell-off.

Commodity, Currency Markets

Crude oil futures are rising $0.52 to $70.97 a barrel after climbing $0.73 to $70.45 a barrel on Monday. Meanwhile, after inching up $2.30 to $1,794.40 an ounce in the previous session, gold futures are edging down $1.30 to $1,793.10 an ounce.

On the currency front, the U.S. dollar is trading at 109.95 yen compared to the 109.99 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1835 compared to yesterday’s $1.1811.
Asia

Asian stocks ended mixed on Tuesday as investors awaited U.S. inflation data for more clues on the health of the world’s largest economy and when the Federal Reserve could start rolling back easy credit and other stimulus.

China’s Shanghai Composite Index tumbled 52.77 points, or 1.4 percent, to 3,662.60 as investors fretted about the regulatory crackdown on technology companies and a widening liquidity crisis for the country’s most indebted property developer.

Hong Kong’s Hang Seng Index slumped 331.58 points, or 1.2 percent, to 25,502.23, with Chinese tech stocks in focus after authorities told the country’s leading tech companies to stop blocking each other’s links on their sites.

Meanwhile, Japanese share rose notably amid continued optimism about new fiscal stimulus ahead of a ruling party leadership vote this month.

There was also come cheer on the data front, with survey data from the Ministry of Finance showing that confidence among larger Japanese companies turned positive in the third quarter.

The Nikkei 225 Index climbed 222.73 points, or 0.7 percent, to 30,670.10, while the broader Topix closed 1 percent higher at 2,118.87.

Seoul stocks rose for the third straight day after central bank data showed export prices in the country grew 18.6 percent year-on-year in August. The Kospi advanced 20.97 points, or 0.7 percent, to 3,148.83.

Australian markets reversed an early slide to end higher after Reserve Bank Governor Philip Lowe insisted that rates won’t increase until 2024. The benchmark S&P/ASX 200 Index rose 12.10 points, or 0.2 percent, to 7,437.30, while the broader All Ordinaries Index ended up 14.20 points, or 0.2 percent, at 7,740.30.

Energy stocks led the advance, helped by higher oil prices. Beach Energy, Woodside Petroleum, Oil Search and Santos jumped 5-7 percent.

Europe

After closing higher for the first time in five days in the previous session amid optimism about growth, the major European markets are turning in a mixed performance on Tuesday following the U.S. inflation data.

While the German DAX Index has risen by 0.3 percent, the U.K.’s FTSE 100 Index is down by 0.1 percent and the French CAC 40 Index is down by 0.2 percent.

Luxury stocks have come under pressure after new local COVID-19 infections more than doubled in China’s southeastern province of Fujian for September 13, prompting officials to quickly roll out measures including travel restrictions to halt the spread of the virus ahead of the week-long National Day holiday starting on October 1.

China-exposed mining stocks have also declined, with Glencore and Anglo American showing notable moves to the downside.

Swedish automobile chip manufacturer Veoneer has also declined after confirming that it has received an updated non-binding proposal from Qualcomm.

French catering and food services giant Sodexo is also moving lower after it acquired a majority stake in the French start-up Wedoogift.

Meanwhile, Deutz AG has jumped. The internal combustion engine manufacturer raised its fiscal year 2021 forecast for a second time in 2021.

The world’s largest jewelry maker Pandora has also moved sharply higher after announcing new financial targets.

JD Sports Fashion has also shown a strong move to the upside after the athleisure company posted a record first half profit.

Vonovia SE has also risen. The property group said that it is waiving all offer conditions in its voluntary public takeover offer for the shares of Deutsche Wohnen SE.

Dutch specialty chemicals maker DSM has also moved notably higher after unveiling plans to sell its materials division.

In economic news, the U.K. unemployment rate dropped 0.3 percentage points from the previous quarter to 4.6 percent in the three months to July, data published by the Office for National Statistics revealed.

The rate came in line with economists’ expectations. At the same time, the employment rate rose 0.5 percentage points to 75.2 percent.

U.S. Economic Reports

A highly anticipated report released by the Labor Department on Tuesday showed a modest increase in U.S. consumer prices in the month of August.

The Labor Department said its consumer price index rose by 0.3 percent in August after climbing by 0.5 percent in July. Economists had expected consumer prices to increase by 0.4 percent.

The consumer price growth was partly due to another sharp increase in energy prices, which spiked by 2.0 percent in August after jumping by 1.6 percent in July. Gasoline prices led the way higher, soaring by 2.8 percent.

Excluding food and energy prices, core consumer prices inched up by just 0.1 percent in August after rising by 0.3 percent in July. Economists had been expecting another 0.3 percent increase.

Higher prices for household operations and shelter contributed to the uptick in core prices, which reflected the smallest increase since February.

Stocks In Focus

Shares of Herbalife (HLF) are moving sharply lower in pre-market trading after the nutrition products maker cut its outlook due to lower than expected levels of activity amongst its independent distributors.

Business software giant Oracle (ORCL) is also seeing pre-market weakness after reporting fiscal first quarter earnings that exceeded estimates but weaker than expected revenues.

On the other hand, shares of SeaChange (SEAC) are likely to see initial strength after the video delivery platforms provider reported a narrower than expected fiscal second quarter loss on revenues that beat estimates.