Upcoming Inflation Data May Keep Traders On The Sidelines

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to extend the lackluster performance seen over the two previous sessions.

Traders may be reluctant to make significant moves ahead of the release of a Labor Department report on consumer price inflation in the month of July on Wednesday.

Economists currently expect consumer prices to climb by 0.5 percent in July after advancing by 0.9 percent in June. The annual rate of consumer price growth is expected to slow to 5.3 percent from 5.4 percent.

Core consumer prices, which exclude food and energy prices, are expected to rise by 0.4 percent in July following a 0.9 percent increase in June. Year-over-year core price growth is expected to drop to 4.3 percent from 4.5 percent.

The Labor Department is scheduled to release a separate report on producer price inflation in the month of July on Thursday.

The inflation data could have an impact on the outlook for monetary policy, although the next Federal Reserve meeting is not scheduled until September.

The major U.S. stock indexes turned in another mixed performance during trading on Monday after ending last Friday’s trading on opposite sides of the unchanged line.

While the Dow and the S&P 500 pulled back off last Friday’s record closing highs, the tech-heavy Nasdaq edged slightly higher.

The Nasdaq inched up 24.42 points or 0.2 percent to 14,860.18, but the S&P 500 slipped 4.17 points or 0.1 percent to 4,432.35 and the Dow fell 106.66 points or 0.3 percent to 35,101.85.

Stocks continued to turn in a mixed performance following last Friday’s better than expected U.S. jobs data.

The closely watched report from the Labor Department added to economic optimism but also raised concerns about the outlook for monetary policy.

Later this week, reports on consumer and producer price inflation may also impact forecasts for when the Federal Reserve will begin scaling back its asset purchases.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster performance by the broader markets.

Gold stocks showed a substantial move to the downside, however, with the NYSE Arca Gold Bugs Index plunging by 2.6 percent. The sell-off by gold stocks came amid another steep drop by the price of the precious metal.

A steep drop by the price of crude oil also contributed to considerable weakness among oil service stocks, resulting in a 1.9 percent slump by the Philadelphia Oil Service Index.

Airline, oil producer and tobacco stocks also saw notable weakness on the day, while some strength was visible among brokerage and steel stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.91 to $67.39 a barrel after tumbling $1.80 to $66.48 a barrel on Monday. Meanwhile, after plunging $36.60 to $1,726.50 an ounce in the previous session, gold futures are rising $4.40 to $1,730.90 an ounce.

On the currency front, the U.S. dollar is trading at 110.45 yen compared to the 110.29 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1718 compared to yesterday’s $1.1737.

Asia

Asian stocks rose broadly on Tuesday as commodities steadied and investors shifted their focus to U.S. consumer inflation data due on Wednesday to assess the outlook for monetary policy.

Chinese shares rose sharply as more cities embark on mass testing and local lockdowns to curb a surge in COVID-19 cases.

The benchmark Shanghai Composite Index climbed 35.30 points, or 1 percent, to 3,529.93, while Hong Kong’s Hang Seng Index ended 1.2 percent higher at 26,605.62.

Japanese shares ended slightly higher as traders returned to their desks after a long holiday weekend. The Nikkei 225 Index edged up 68.11 points, or 0.2 percent, to 27,888.15 as investors kept their focus on corporate earnings. The broader Topix closed 0.4 percent higher at 1,936.28. SoftBank rose 0.9 percent before releasing its earnings after the market close.

Airline ANA Holdings surged 3.6 percent and pharmaceutical firm Daiichi Sankyo soared 5.2 percent. On the flip side, Nippon Yusen shed 1.9 percent and Sony lost 2.5 percent.

Japan posted a current account surplus of 905.1 billion yen in June, the Ministry of Finance said earlier today. That exceeded expectations for a surplus of 779.8 billion yen following the 1,979.7 billion yen surplus in May.

Australian markets eked out modest gains as the country’s most populous state expanded its COVID-19 lockdown to include a rural town and the coastal region of Byron Bay.

The benchmark S&P/ASX 200 Index rose 24.20 points, or 0.3 percent, to 7,562.60, while the broader All Ordinaries Index ended up 26.10 points, or 0.3 percent, at 7,830.40.

Building supplies maker James Hardie rallied 2.9 percent after raising its earnings forecast.

National Australia Bank edged up 0.2 percent after the lender said it would buy Citigroup’s Australian consumer business for a total cost of $1.2 billion.

Energy stocks ended broadly lower, with Origin Energy, Oil Search and Santos declining 1-2 percent. Tech stocks rose, with heavyweight Afterpay climbing 3.2 percent.

Australia’s business conditions and confidence declined sharply in July amid strict restrictions in many states to curb the spread of the coronavirus, survey results from National Australia Bank showed today. The business conditions index fell to 11 in July from 25 in June.

Seoul stocks ended lower for the fourth straight session as concerns over the spread of the new coronavirus dented sentiment. The benchmark Kospi dropped 17.23 points, or 0.5 percent, to close at 3,243.19.

South Korea’s daily new coronavirus cases bounced back above 1,500 today as the nationwide resurgence of COVID-19 cases continued during the summer vacation season. Tech stocks and financials slumped, while bio stocks bucked the weak trend.

Market heavyweight Samsung Electronics declined 1.6 percent and No. 2 chipmaker SK Hynix gave up 3 percent, while Samsung Biologics jumped 4.2 percent.

Europe

European stocks are mostly higher on Tuesday as investors shrug off weak regional data and look ahead to U.S. inflation numbers on Wednesday for further indications of when the world’s largest economy may start to withdraw stimulus.

Economic expectations declined in Germany for a third consecutive month, due to a more challenging environment for the German economy, the ZEW economic research institute said. The headline number for August dropped more than expected to 40.4 from 63.3 in July.

Elsewhere, total U.K. retail sales grew 6.4 percent on a yearly basis in July, while like-for-like sales were up 4.7 percent, the British Retail Consortium said.

The lifting of restrictions did not bring the anticipated in-store boost, with the wet weather leaving consumers reluctant to visit shopping destinations, Helen Dickinson, chief executive at BRC, said.

Currently, the pan-European Stoxx 600 Index is up by 0.3 percent. The German DAX Index and the French CAC 40 Index are also up by 0.2 percent and 0.1 percent, respectively, although the U.K.’s FTSE 100 Index is down by 0.1 percent.

Derwent London has moved notably higher. The company said that it has bought two properties in London’s West End for 214.6 million pounds ($297.1 million) and entered into a joint venture with Lazari Investments to buy three London properties.

Workspace provider IWG has also jumped. After posting a bigger half-year loss, the company said it was cautiously optimistic about the rest of the fiscal year. Flutter Entertainment has also soared after the gambling firm beat profit estimates.

Munich Re has also advanced on the day after the German reinsurance group raised its gross premium forecasts for the full year.

HelloFresh shares have also moved sharply higher. The meal-kit firm, which delivers pre-portioned meal ingredients with recipes to subscribers, said orders increased by 71.2 percent to 30.98 million in the second quarter, compared to 2020.

Meanwhile, British investment manager M&G has fallen after it swung to an IFRS loss after tax of £248 million for the six months ended June 30.

Aurubis has also slipped. The largest copper producer in Europe said it plans to sell the FRP plant in Zutphen (Netherlands) as well as the slitting centers in Birmingham (United Kingdom), Dolný Kubín (Slovakia), and Mortara (Italy) with a total of about 360 employees. The buyer, INTEK, is a holding that includes the KME Group.

U.S. Economic Reports

Preliminary data released by the Labor Department on Tuesday showed labor productivity in the U.S. increased by much less than expected in the second quarter.

The Labor Department said labor productivity jumped by 2.3 percent in the second quarter after soaring by a downwardly revised 4.3 percent in the first quarter.

Economists had expected productivity to surge up by 3.5 percent compared to the 5.4 percent spike that had been reported for the previous quarter.

The report also showed unit labor costs climbed by 1.0 percent in the second quarter, just shy of economist estimates for an increase of 1.1 percent.

Meanwhile, the 1.7 percent jump in labor costs previously reported for the first quarter was revised to a 2.8 percent decrease.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $58 billion worth of three-year notes.

Chicago Federal Reserve President Charles Evans is due to host a virtual on-the-record conversation on the economy and monetary policy with members of the media at 2:30 pm ET.

Stocks In Focus

Shares of 3D Systems (DDD) are moving sharply higher in pre-market trading after the 3D printing technology company reported second quarter results that beat analyst estimates on both the top and bottom lines.

Movie theater chain AMC Entertainment (AMC) is also likely to see initial strength after reporting a narrower than expected second quarter loss on revenues that exceeded expectations.

Shares of Kansas City Southern (KSU) are also seeing significant pre-market strength after Canadian Pacific Railway (CP) raised its offer to acquire the railway operator to about $300 per share.

On the other hand, shares of Planet Fitness (PLNT) may move to the downside after the fitness center operator reported second quarter earnings that missed analyst estimates.

Sleep products company Casper Sleep (CSPR) is also seeing considerable pre-market weakness after reporting a wider than expected second quarter loss.