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Stock Markets Prolong Winning Streak on Hopes Inflation Has Peaked

Stock markets in Asia continued to move ahead on Tuesday and the US Dollar maintain stability under its latest peak while waiting for the inflation report from the US. Some analysts say the inflation report might give another sign that the high inflation has reached its peak.

Market Advances

Nasdaq and S&P 500 futures were strong while stocks in Europe declined. It is, thus, a low start for the markets in Europe.

The MSCI general index monitoring shares in the Asia-Pacific region except for Japan, increased by 0.8%. The advance was led by the South Korean KOSPI. The Nikkei in Japan added 0.2%.

The MSCI has now increased for the fourth straight day as it recovered from its earlier low state. Financial analysts are calling attention to the US central inflation figures. They say it might still grow and its implications on rates in the short term are not clear. 

Rob Carnell of ING believes that it is quite early to celebrate the end of this inflation like some market players might be doing.

Crude in the US is selling below $90/barrel as it sinks by almost 30% from mid-June. It is about the same area it was trading in before war broke out between Russia and Ukraine. 

The US market has placed a 90% bet that the Federal Reserve will increase interest rates by 75basis points during its next monetary policy meeting next week. The position might be very vulnerable to seeing a declining consumer price index surprise.

Expecting the Feds

Kristina Clifton who is an economist with CBA said lesser inflation reading will build a case for less interest rate increment to 50 basis points. However, if the expected inflation report comes in higher, it would solidify the market’s expectation of a 75 basis point rate increase.

The inflation report is due to be released later on Tuesday. The general prediction is that the August rate would increase by 0.3% M-o-M as it was in July. Indexes on Wall Street posted gains for the fourth consecutive session on Monday.

Reports from Asia on Tuesday are showing not-too-bright pictures of the economies in the region. Japan’s wholesale costs jumped by 9% to indicate that there was pressure on margins. But the slow gains in August gave hope that there might be some relief.

The rate increase implemented in New Zealand one year ago is beginning to have some harsh effects. Commodity prices are down by 6%. 

Investment banks are equally giving their countermeasure to the enthusiasm in the market. A source close to Goldman Sachs said the company is planning to cut jobs. 

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