European Futures Rise Ahead of US Inflation Data: Markets Wrap

(Bloomberg) — European futures and Asian stocks gained, as the tech sector led a risk-on rally ahead of key US data that may signal easing price pressures.

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The Euro Stoxx 50 contract advanced 0.2%, as a rally in the world’s largest tech stocks lifted global shares to record highs. The dollar fell against most major currencies ahead of the inflation data that might raise the chance of Federal Reserve interest-rate cuts, while US stock futures were steady.

The so-called core CPI, which excludes food and energy costs and is seen as a better measure of underlying inflation, is expected to rise 0.2% in June for a second month. That would mark the smallest back-to-back gains since August — a pace seen as palatable for Fed officials. Swaps are pricing in two Fed cuts in 2024, with a strong chance of the first coming in September.

“June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory,” said Anna Wong at Bloomberg Economics. “That should set the stage for the Fed to start cutting rates in September.”

In Asia, Taiwan Semiconductor Manufacturing Co. traded at record levels after the sole supplier of Nvidia Corp. and Apple Inc.’s most advanced chips said second-quarter sales grew the fastest since 2022. Sony Group Corp., Tencent Holdings Ltd. and Korean chipmaker SK Hynix Inc., which traded at its highest levels since 2000, were among top contributors to the climb in the regional stock index.

The S&P 500 and Nasdaq 100 each gained more than 1% overnight, spurred by the likes of Nvidia and Apple. The iPhone maker said it aims to ship 10% more new devices after a bumpy 2023. The S&P 500 has advanced in each of the past seven sessions, its longest winning streak since November.

Meanwhile, Jerome Powell told Congress that the Fed doesn’t need inflation below 2% before cutting rates and that officials still have more work to do. He noted the labor market has cooled “pretty significantly.” Powell cited a “good ways to go” on the balance-sheet runoff, and said commercial real estate doesn’t threaten financial stability.

“The key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data – will deliver a rate cut in September,” said Krishna Guha at Evercore ISI.

Investors will be looking at any impact from the China Securities Regulatory Commission’s decision to tighten rules on short selling and high-frequency trades in a bid to crack down on improper arbitrage and maintain market stability. Sentiment toward Chinese stocks has deteriorated ahead of the country’s Third Plenum, which convenes next week.

Elsewhere, the Bank of Korea left its benchmark interest rate unchanged Thursday as it seeks more evidence that inflation will continue to cool.

Oil climbed for a second day as signs of growing demand and a risk-on tone across broader markets combined to aid sentiment. Gold advanced for a third day.

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