US open: Stocks rise cautiously ahead of inflation report

US futures

Dow futures +0.26% at 34050

S&P futures +0.28% at 3980

Nasdaq futures +0.2% at 11420

In Europe

FTSE +0.74% at 7782

Dax +0.8% at 15064

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CPI & jobless claims

US stocks are set to open modestly high in cautious trade ahead of the US inflation report, which will provide further clues as to whether the Federal Reserve will be able to slow the pace of rate hikes.

US CPI is released at 08:30 ET and is expected to cool further in December to 6.5% YoY, down from 7.1%. Core inflation is also expected to cool to 5.7%, down from 6.0% a month earlier.

The market has been focused on this data release all week, as it has the potential to set the market mood for the coming weeks until the FOMC meeting at the end of the month.

Expectations are for inflation to continue trending lower, which would fuel bets of a less hawkish Federal Reserve.

US indices have rallied across the start of the year on hopes of a more restrained US central bank, so cooling inflation to a degree has been priced in. Even so, the data confirming those expectations is still likely to boost stocks further and pull the USD lower.

In addition to inflation US, jobless claims will also be released and are expected to increase mildly to 215k, up from 205k as the US labour market continues to show resilience in the face of high inflation and rising interest rates.

Corporate news

Disney is set to rise on news that activist investor Nelson Peltz is pushing for a board seat, setting up confrontation with CEO Bob Iger after he returned as CEO

Apple is set to rise to a three-week high on the open, boosted by reports that the tech giant is considering introducing a touch screen to Mac computers. Barclays cut its price target on Apple yesterday to $133 down from $144.

Tesla remains under the spotlight and is set to fall on the open on reports that it has delayed its plan to expand its gigafactory in Shanghai aimed to double its output capacity.

Where next for the Nasdaq?

The Nasdaq has picked up from 2023 low of 10676 and is attempting to grind higher. The price has been bouncing along this lower since October. The bullish crossover on the MACD is keeping buyers hopeful of further upside. Buyers will look to rise above the 50 sma at 11395 before bringing 12200 into focus the December high. A rise above here creates a higher high. On the downside, sellers could look to break below 10676 to open the door to 10430, the 2022 low.

FX markets – USD falls, JPY rises

The USD edging lower ahead of the CPI report and trades around 7-months low as investors pricing expectations of a less aggressive pace of rate hikes from the Federal Reserve. While recent Fed officials have sounded slightly hawkish, investors are betting that the Fed will slow the pace of rate hikes in February to 25 basis points.

EUR/USD is holding onto recent gains in quiet trade. Comments from Finish Central Bank President Olli Rehn, who said that substantially more rate hikes are needed, boosted the euro yesterday and come after ECB’s Christine Lagarde warned that more 50 basis point rate hikes were coming.

USD/JPY is trading at a weekly low on reports that the BoJ will review the side effects of its ultra-loose monetary policy at next week’s meeting. Policymakers could correct distortions in the yield curve. This comes following a surprise tweak from the BoJ in the December meeting.

USD/JPY -1.4% at 130.55

EUR/USD +0.05% at 1.0760

Oil rises on continued China reopening optimism

Oil prices are rising, building on gains from the previous session amid optimism surrounding the reopening of the Chinese economy and ahead of the US inflation data later today.

China, the world’s largest importer of oil, ending its zero-COVID measures has boosted the demand outlook for oil significantly, helping black stuff rally over 6.5% so far this week.

The next catalyst for oil is US inflation data which is due out shortly and could point to a less aggressive Federal Reserve. A slower pace to rate hikes could mean that a soft landing in the US is still a realistic possibility which, combined with the economic rebound in China, would improve the demand outlook for oil.

EIA crude oil stockpiles are due later today.

WTI crude trades +1.25% at $78.83

Brent trades at +1.25% at $83.80

Learn more about trading oil here.

Looking ahead

13:30 US CPI

13:30 Initial jobless claims