Markets Mixed Ahead of Inflation Data – Dow up 0.8%
US Stock markets had another mixed day yesterday as investors eye the pending PCE Inflation data later today. The Dow led the way, closing up 0.8% with the S&P following along, up 0.45%, however, the Nasdaq slid on the day, closing just south of flat. After a relatively quiet day on Wednesday, US treasury yields surged as upbeat US data backed up Jerome Powell’s hawkish rhetoric, and the 10-year benchmark rate hit a high of 3.854% before dropping off later in the session. The Dollar also maintained its topside trajectory, the Euro dropping under 1.0900 again and the UsdJpy sniffing at the 145.00 level.
US Rates Higher for Longer
The market is slowly coming around to the Fed Chair’s point of view that interest rates in the US will remain higher for longer and many investors are concerned that this could lead to a dramatic increase in volatility, especially with the market entering the Northern Hemisphere summer trading season. Stock markets in general have remained buoyant as the market looked ahead to a relaxing of the tightening cycle, but data showing a resilient US economy and Fed comments are pointing to rates remaining higher for longer and this could lead to some serious corrections in the market over the next few months.
PCE Inflator the Focus Today
It is set to be an interesting end to the trading week today as market sentiment remains relatively strong. Asian investors will turn their attention to China early in the day with the release of both the Manufacturing and Non-Manufacturing PMI numbers due out which will give a further indication of the health of the world’s second-biggest economy. We have the Euro Flash CPI numbers due out in the London session but the major data focus for the day will come once New York opens. The latest GDP data is due out north of the border in Canada but expect that result to remain localized as global investors look at the Fed’s favourite inflation number, the Core PCE Price Index, which is released at the same time – the expectation is for a 0.3% increase month-on-month.
