Stocks climbed to record highs as US inflation data met expectations, easing price concerns and boosting expectations of a rate cut by the Federal Reserve in September.
The MSCI World Index rose 0.2% to a record high, following a surge in Wall Street stocks to new highs as the money market almost fully priced in a 25 basis point rate cut by the Federal Reserve next month. Asian stocks rose 1% as the Nikkei 225 hit a record high and the Taiwan stock market was close to peaking, while the Shanghai stock market jumped to its highest level since December 2021.
Oil prices edged down slightly, while US Treasuries and the dollar index remained stable. Gold rose by 0.2%.
Although underlying inflation picked up to its fastest pace since the start of the year, a modest increase in commodity prices eased concerns that trade-related costs could spread to broader price pressures. With the consumer price index report released, investors will turn their attention to Friday’s US retail sales data to look for signs that consumer confidence is as optimistic as indicated by corporate earnings reports and comments.
Alan Centner of Morgan Stanley Wealth Management said, “Inflation is rising, but not as much as some people feared. In the short term, the market may accept these data because they should allow the Federal Reserve to focus on the weakness in the labor market and keep the possibility of a rate cut in September.”
The Federal Reserve kept interest rates unchanged this year, hoping to figure out whether tariffs would lead to sustained inflation. Meanwhile, the labor market – the other half of the Fed’s dual policy mandate – is showing signs of losing momentum.
Alexandra Wilson-Elliott of Goldman Sachs Asset Management said: “This inflation data supports the argument for a rate cut in September, which will be a key driver for the market. With inflation under control and signs of weakness in the labor market becoming more evident in the revised employment data, the focus will now shift to employment.”
Technical analysis:
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Gold: The combination of the blue momentum break and the yellow low-sweep liquidity we provided in the plugin yesterday was that the price dropped to around 3330 before rebounding. For today, we believe that the strategy combination from yesterday is still valid and should be maintained for the day. For detailed positions, please consult the plugin.
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Nasdaq: Yesterday, our plugin strategy was to place a sell stop at the lower boundary after the price broke above the yellow zone. The result was a 1:1 risk-reward ratio. However, given that the market’s expectation for a rate cut in September remains strong at over 90% after the CPI data, we may pay more attention to the long-term signals after the price retraces to 23,700 in the short term. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The strategy we provided through the plugin yesterday was a yellow low-sweep liquidity strategy. The price began to stabilize and rebound only after it dropped below 63. Although the current rebound space is limited, we still hope to see a subsequent momentum breakthrough signal within the day before attempting to capture a long position signal. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key economic data and events to focus on:
22:30 U.S. EIA Crude Oil Inventory Change (in thousands of barrels) (to 0808) last week
