Futures on the US stock indices have been climbing for the fifth trading session in a row ahead of the CPI report, which may significantly affect their movements. The US government bond yields dropped as well as the US dollar. Futures contracts for the S&P 500 and Nasdaq 100 indices rose by about 0.6% each. Yesterday, the S&P index scored its best four-day gain since June. The Dow Jones showed a more modest increase, adding 0.2%. Investors continue to assess how high interest rates have impacted the economy.
The Core Consumer Price Index is expected to be revised downward, while the CPI index for August is likely to grow. According to economists' forecasts, the Core CPI index will decline to 8.1%. If so, it will once again trigger market uncertainty over the prospects for monetary policy. Some economists are confident that the Fed may end the monetary tightening cycle earlier. Others warn that the central bank will need more signs of a consistent slowdown in inflation before considering any changes. The regulator is even ready for an economic downturn to curb soaring inflation.
The majority of Fed policymakers are backing aggressive tightening. This is why the central bank will hardly change its stance after a second straight decline in inflation. It will be also premature to believe that inflation has peaked.
Economists at JPMorgan Chase & Co. suppose that the likelihood of a soft landing for the global economy is quite high, which will boost demand for risky assets. "A clutch of recent data from major economies is suggesting moderating inflation and wage pressures as well as stabilizing consumer confidence", the bank said.
Two consecutive reports indicating a sharp slowdown in inflation, as well as a strong employment report last month will indicate that a recession in the US economy will not last long. However, this may not be enough to make the Fed hike the key rate by 50 basis points next week.
The Stoxx Europe 600 index is located in the green zone after an increase in the shares of UBS Group AG and Bayer AG, which jumped more than 2%. Oil prices are moving up as a weaker US dollar mitigated fears about rising global demand.
As for the technical outlook of the S&P500, the index has been rising for the fifth day in a row amid market optimism. To cement further upward correction, it should break above $4,150. A breakout of this level will facilitate the uptrend that has been going on since the middle of the summer. Hence, the index is likely to aim at the resistance level of $4,184. A more distant target will be the $4,208 level. If it moves down, a breakout of $4,116 will push the price to $4,091. After that, it could decrease to a low of $4,064. If so, it is likely to reach $4,038 where the index may halt its drop.
