Nasdaq100 Outlook: Stocks soar as inflation cools

US futures

Dow futures +0.8% at 34525

S&P futures +0.2% at 4477

Nasdaq futures +1.1% at 15285

In Europe

FTSE +1.54% at 7290

Dax +1.2% at 15695

• US CPI cooled to 3% vs. 3.1% forecast
• Fed speakers Neel Kashkari & Loretta Mester are due
• USD falls to a 3-month low
• Oil rises on hopes the Fed’s hiking cycle is almost done 

US CPI cooled to 3%

US stocks are set to jump on the open after US inflation came in cooler than expected, feeling bad that the Federal Reserve will soon end its interest rate hiking cycle.

US CPI cooled to 3% YoY in June, below the 3.1% forecast, marking the slowest annual increase since March 2021. On a monthly basis, CPI rises 0.2%, below the 0.3% forecast. Meanwhile, core inflation cooled for the third straight month to 4.8%, down from 5.3% and below the 5% forecast.

The data comes after Friday’s non-farm payroll report showed that US job creation slowed in June to its weakest pace in a year, fueling optimism that the Fed’s rate hikes are taking effect in the economy.

The market continues to price in a 25 basis point rate hike in July. However, the market is less convinced that the Fed will hike again this year after that.

Following the data, the three main indices on Wall Street are on track to start the session sharply higher.

Looking ahead US Federal Reserve officials are due to speak. Neel Kashkari and Loretta Mester will be in focus and could provide clues of the Fed's next moves.

Corporate news

Microsoft rises after a judge ruled in favour of the tech giant, boosting the chances of its $69 billion acquisition of Activision Blizzard going through. The FTC is expected to appeal the decision this week.

Nvidia trades 1.3% higher on reports that the semiconductor firm could be recruited as an anchor ahead of the Arm IPO to help instill confidence in the market and cement its valuation.

Nasdaq100 outlook – technical analysis

The Nasdaq 100 briefly slipped below the 20 sma on Monday but has risen back above the resistance at 15050, which now offers immediate support. Should this support hold, buyers could look to break above 15275 and create fresh 2023 highs towards 15300. Meanwhile, a break below here opens the door to 14687, the June 26 low, before exposing the 50 sma at 14400.

FX markets – USD falls, GBP rises

The USD is falling following US inflation data. The data doesn’t change expectations for a July rate hike but sees the market reining in bets for a second hike to 22% from 30% yesterday.

EURUSD holds over 1.10 at around a 2-month high amid bets that the ECB will keep raising interest rates. The market expects a 25bps hike in July and another by October. However, with weaker data coming through, fears of a prolonged recession could keep gains limited.

GBPUSD is rising, supported by yesterday’s record wage growth of 7.3% in the 3 months to May, which keeps pressure on the BoE to continue hiking rates to tame inflation. UK CPI data is due next week. UK banks passed the BoE’s stress test.

EUR/USD +0.7% at 1.1085

GBP/USD +0.44% at 1.29

 

Oil jumps on USD weakness, hopes that the Fed soon concludes its hiking cycle.

Oil prices are rising after strong gains in the previous session. Oil rallied over 2.5% on the back of a weaker U.S. dollar and on hopes that the Federal Reserve is nearing the end of its rate hiking cycle. Following the inflation data, oil extends gains on hopes that peak rates will soon be reached.

In early trade today the price barely moved as the bulls and the bears struggled between expectations of supply cuts from the world's biggest exporters against concerns of global economic weakness sapping demand.

Meanwhile, US crude inventories rose by two million barrels in the week to July 7^th, well above a 500k barrel rise. However, EIA data later today is expected to show a draw in stock piles.

WTI crude trades +1.1% at $74.20

Brent trades at +1.1% at $79.87