“The next 30 hours could be the calm before the storm”
Now is not the time to take risks. As the US releases its latest inflation figures tomorrow, those for July are likely to drop the Cac 40 slightly. Futures contracts on the Paris index point to an open slightly by 11 points (-0.2%). Yesterday, Wall Street’s S&P 500 closed steady (-0.12%), but after gaining as much as 1% during the session.
On both sides of the Atlantic, stock markets have rallied around 10% in a month, particularly on hopes of a turning point in Fed monetary policy early next year. Investors were not only convinced – at least they were until Friday’s release of a jobs report that was too strong for their liking – that the Federal Reserve was on the verge of halting rate hikes, but also expected rate cuts to come the next year, in the first six months, so much on their minds given the activity statistics, the Federal Reserve had done most of the work in fighting economic overheating and inflation.
How about a 100 basis point raise?
The consumer price index for the month of July, which will be published early tomorrow afternoon, will influence the behavior of the Fed in its aggressiveness in raising the base rate fed fund in September. Since Friday and the announcement of more than 500,000 job creations in July in the United States, more than in other months, investors have adjusted their expectations and again expect a plus of 75 basis points (vs. +50 basis points). shortly before the publication of the statistics). Citi economists are not ruling out a 100 basis point hike, which would bring the Fed’s interest rate range to a 3.25-3.5% range from 0% in March.
“The next 30 hours could be the calm before the storm”, writes this morning Jim Reid, strategist at Deutsche Bank. And he reminds us that yesterday, however “There was good news” On the inflation front, look at the results of the New York Fed Consumer Price Expectations Survey. ” Their inflation expectations were falling over the one-year, three-year and five-year horizons. That’s sweet music to the Fed’s ears, because if this trend continues, it means the Fed may not have to be as aggressive in raising interest rates, as one of its major fears is that expectations of higher inflation rates will become a self-fulfilling prophecy lead to real inflation as firms adjust prices and workers negotiate wages accordingly. »
The consumer price index will be published tomorrow at 2.30 p.m. As oil prices continue the recovery that started on Friday, Total Energies Even today, the Cac 40 could be on the support side. Aside from job data released late last week staving off US recession fears, a raw recovery initially sparked the impasse in US-Iran nuclear talks should also support prices.