Investing.com — All eyes will be on the U.S. monthly consumer prices release later in the session as investors look for confirmation that the Federal Reserve will begin cutting interest rates in September. Inflation in the U.K. was relatively benign, while UBS impressed with its quarterly earnings.
1. US CPI in focus
It is now the turn of consumer prices, which will be released later on Wednesday, to consolidate the start of the Federal Reserve’s path of easing next month, after the publication of moderate US producer prices on Tuesday.
The July PPI rose a less-than-expected 0.1% after rising 0.2% in June, the U.S. Labor Department reported. In the 12 months through July, the PPI rose 2.2%, reversing from June’s 2.7% increase.
The data resulted in the probability of a sharp 50-basis-point rate cut in September rising to 53.5% from 50% the previous day, according to CME’s FedWatch tool.
The consumer price index due on Wednesday is expected to confirm generally benign inflation pressures, which would allow the US central bank to cut its policy rate from the 5.25%-5.50% range in which it has remained for more than a year.
Federal Reserve Chairman Jerome Powell has stressed that favorable inflation data is crucial to a rate cut in September.
July CPI data is expected to show inflation continued to approach the Fed’s 2% annual target, with forecasts for annual inflation to ease slightly to 3.2%, the lowest level since April 2021.
The headline rate is expected to remain at 3.0% annually.
2. Stable futures awaiting new inflation release
U.S. stock futures traded broadly unchanged on Wednesday, steadying after recent gains ahead of the release of the widely watched monthly consumer price report.
At 04:00 ET (08:00 GMT), the contract was up 25 points, or 0.1%, while the dollar was down 1 point and the dollar was down 6 points, or 0.1%.
Wall Street’s major indexes benefited from a broad rally on Tuesday following the release of benign producer price data.
Blue chips rose more than 400 points, or 1%, while broad-based stocks gained 1.7% and technology-based stocks rose 2.4%.
The July consumer price index is expected to show that inflation pressures remain subdued enough to allow the Federal Reserve to cut interest rates in September.
In the corporate sector, Intel (NASDAQ:) sold its 1.18 million share stake in the British chip firm. Arm Holdings (NASDAQ:) in the second quarter, a regulatory filing showed Tuesday.
The chipmaker said earlier this month it would cut more than 15% of its workforce and suspend its dividend amid a reduction in spending on traditional semiconductors for data centers and a shift toward artificial intelligence chips.
The Wall Street Journal reported that chocolate giant Mars is seeking to pay $83.50 per share of packaged food maker Kellanova (NYSE:K), a 12% premium to Tuesday’s close, while valuing the company at more than $30 billion.
3. UBS impresses with strong net profit in the second quarter
UBS (SIX:) reported an impressive second-quarter performance on Wednesday, with the Swiss banking giant detailing a net profit of $1.14 billion, comfortably beating forecasts.
The net profit compared with the $528 million forecast in a survey of analysts provided by the company for what were the bank’s first results since UBS completed its formal legal merger with Credit Suisse in May.
UBS Chief Executive Sergio Ermotti said the results reflected the “significant progress” the bank had made since closing its acquisition of Credit Suisse.
“We are well positioned to meet our financial targets and return to the levels of profitability we achieved before we were asked to intervene and stabilise Credit Suisse,” he added in a statement.
“We are now entering the next phase of our integration, which will be critical to achieving further substantial benefits in terms of costs, capital, financing and taxes.”
UBS said the macroeconomic outlook was clouded by ongoing conflicts, geopolitical tensions and the upcoming US election. It expected these uncertainties to persist for the foreseeable future and would likely lead to greater market volatility than in the first half of the year.
4. UK inflation rose slightly in July
US CPI release could be the main economic number of the day [see above]But this is not the only important inflation figure, as the UK also published its consumer price report for July.
Britain’s rate rose to 2.2% in July, exceeding the Bank of England’s 2% target after two months at that level but still a sharp drop from the 41-year high of 11.1% hit in October 2022.
However, this was a slightly smaller increase than the 2.3% expected, and annual services inflation, closely watched by the BoE, fell sharply to 5.2% in July from 5.7% in June.
This followed data released on Tuesday showing the rate slowed to its lowest level in nearly two years, at 5.4%.
The central bank cut its base rate earlier this month for the first time in more than four years, but uncertainty remains over when or if the central bank will cut rates again this year.
5. Crude oil rises after US inventories fall
Crude oil prices rose on Wednesday, boosted by industry data showing a bigger-than-expected draw in U.S. stockpiles, while heightened geopolitical tensions in the Middle East added support.
At 04:00 ET, futures (WTI) were up 0.6% at $78.80 a barrel, while the contract was up 0.6% at $81.16 a barrel.
Data showed U.S. crude inventories fell by 5.2 million barrels in the week to Aug. 10, far more than expectations for a 2 million-barrel draw.
The reading, if confirmed by an official later in the day, showed demand remained robust in the world’s biggest fuel consumer even as the busy summer travel season was coming to an end.
Crude oil markets have also been supported by heightened tensions in the Middle East amid fears that a larger war there could disrupt oil supplies from the crude-rich region.
Iran has vowed a harsh response to the killing of Hamas’s leader late last month. Israel has neither confirmed nor denied involvement, but is fighting Hamas in Gaza after the group attacked Israel in October.
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