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European stocks and Wall Street futures rose while the dollar fell on Wednesday as investors watched U.S. inflation data, which is expected to drop June’s inflation rate to its lowest level in more than two years.
The European region-wide Stoxx 600 index rose 0.7% led by basic materials and healthcare stocks, with France’s Cac 40 up 0.8% and Germany’s Dax 0.7% in early trading. London’s FTSE 100 index rose 0.8%, with all sectors except real estate in positive territory.
Contracts tracking Wall Street’s benchmark S&P 500 index were up 0.2% ahead of the New York open, but investors were swayed by four Federal Reserve officials and a Fed speech. A measure of the dollar’s strength against a basket of other six major currencies fell 0.2% as it declined. US inflation data for June released.
Economists surveyed by Refinitiv expect annual consumer price inflation to slow to 3.1% from 4% in May. This will be the lowest inflation rate since March 2021. Core inflation, net of volatile food and energy prices, is expected to slow to 5% a year from 5.3% in June.
The market expects the Fed to raise rates by 0.25 percentage points at its meeting at the end of July, with a roughly 50% chance of another rate hike by November. However, “if we see a dovish CPI move, the Fed may end this tightening cycle.” [0.25 percentage points] In July,” said a JP Morgan analyst.
Investors are also divided on whether the U.S. can avoid a recession. “Think of the economy and markets at a fork in the road, with one path leading to a soft landing and the resulting positive impact on markets, the other to a recession,” said co-head Jason Draho. Please think that it will end with.” Americas asset allocation in UBS Global Wealth Management.
“The skepticism about a soft landing rests on two related points,” Draho added. “First, headline CPI shows a sharp decline in inflation, while core inflation remains firmer. The Fed will be forced to raise interest rates beyond the 1.5x rate currently priced in by the market.”
The situation in other Asian markets was mixed. China’s CSI300 index and Japan’s TOPIX both fell 0.7%, while Hong Kong’s Hang Seng index rose 1.1% and South Korea’s KOSPI index rose 0.5%.