US inflation data could affect the prospects for further aggressive Federal Reserve rate hikes
Wall Street indices finished little changed after a choppy session on Monday, suggesting the rally is running out of breath. The buying momentum has waned since an unexpectedly strong US jobs report stoked expectations of a more aggressive interest rate rise by the Federal Reserve. The Dow Nasdaq Composite and the S&P 500 Index fell 0.1% both, while the Dow Jones gained less than 0.1%. Adding to a less upbeat tone in the market, NVIDIA revealed dismal quarterly earnings, pressuring the semiconductor sector. The company posted revenue of $6.7 billion, well below its previous guidance of $8.1 billion. NVIDIA stocks fell over 6% following the report.
Asian equity markets were mixed on Tuesday as investors turned their focus to US inflation data that could affect the prospects for further aggressive Federal Reserve rate hikes. MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.31% higher while Japan’s Nikkei 225 fell 0.88% to snap a four-day winning streak. In part, the pressure came from weak quarterly earnings by heavyweights. Japan Steel Works and Tokyo Electron lost nearly 10% following the release of their quarterly earnings at the start of the week.
In Europe, stocks opened slightly lower on Tuesday, with all eyes on the US CPI data tomorrow. The pan-European Stoxx 600 slipped marginally below the flatline in early trading. US stock index futures were little changed in early pre-market deals. In his latest remarks, Bank of England deputy governor Dave Ramsden said recession risks could force the central bank to cut rates next year. On the data front, UK retail sales rose 1.6% in July due to sales of hot-weather clothing.
The US dollar remains on the defensive since Monday, holding above the 106.00 figure after a failure to challenge the 107.00 mark last week. As such, EURUSD retains a mild bullish tone, also deriving support from a slightly ascending 20-DMA. The pair has settled around 1.0200, struggling for direction ahead of the US inflation report. In general, the shared currency is expected to stay weak in the short term, as the current situation in Europe requires significant improvements on both the geopolitical and economic fronts.