The last week saw an improvement in the mood on the world markets. Futures for the Nasdaq, Dow Jones, and S&P 500 on Wall Street ended the day up 1.84 percent, 0.31 percent, and 0.23 percent, respectively. Tech stock prices increased significantly. The DAX 40 and FTSE 100 ended the day in Europe up 0.67 and 0.22 percent, respectively. The Nikkei 225 in Japan rose 1.35 percent in the meantime.
Early in the week, a strong US ISM Manufacturing PMI highlighted the economy's resilience, which helped calm recessionary fears. An impressive jobs report was released after that. 528k non-farm payrolls were unexpectedly added in the US, and wage growth was also higher.
But there appears to be a rift developing. Markets have been factoring in Federal Reserve rate cuts in 2023 since June. Despite a 75-basis point increase late last month, this is the case. Growing concerns about an economic downturn appear to increase wagers on a Fed reversal. Such a result may considerably lower inflation, but it may be a long shot for this year.
As a result, most of this past week was devoted to downplaying market expectations of a shift in 2019. The jobs report served as another evidence that mood is likely to be disappointed due to this. Market markets anticipated a further rate increase of 25 basis points for Fed Funds Futures this year.
In light of this, the US Dollar, gold, the Euro, the Japanese Yen, and Wall Street are focusing on the following CPI report. The US headline inflation rate is predicted to decline the next week to 8.7% y/y for July. That would be a decrease from the earlier 9.1 percent. Uncomfortably, the core gauge is projected to increase from 5.9 percent to 6.1 percent year over year. Yet another strong print might easily erase the market gains made in recent weeks.
Before the US ends the week with the University of Michigan Sentiment, other important economic data include Chinese inflation and UK GDP figures. Additionally, it is earnings season, and Walt Disney Co. is reporting. The performance of their streaming service will be given specific attention. What else is coming up?