Morning Markets
As of this morning, September E-Mini S&P 500 futures (ESU23) are down -0.06%, and September Nasdaq 100 E-Mini futures (NQU23) are down -0.14%.
U.S. CPI Report Influence
Stock index futures are facing moderate declines today due to a mixed U.S. Consumer Price Index (CPI) report. In August, U.S. consumer prices rose to +3.7% year-on-year (y/y), surpassing expectations of +3.6% y/y and marking a significant increase from July’s +3.2% y/y. This unexpected rise in CPI has pushed the 10-year T-note yield to a three-week high of 4.342% and reinforces the likelihood of the Federal Reserve maintaining higher interest rates for a longer duration.
However, the stock market losses have been limited, as August’s core CPI eased to +4.3% y/y from July’s +4.7% y/y, aligning with expectations and marking the slowest increase in almost two years. This mixed data has contributed to the cautious sentiment among traders.
Global Market Factors
In addition to the mixed CPI report, stock index futures are also influenced by negative carryover from European stock market declines. This was prompted by the 10-year German bund yield reaching a three-week high, following a Reuters report suggesting that the European Central Bank (ECB) might forecast Eurozone inflation above 3% for 2024 in its upcoming economic estimates. This has raised expectations for a 25 basis point rate hike by the ECB at its policy meeting on Thursday.
Rate Hike Expectations
Currently, the markets are pricing in a 5% probability of a 25 basis point rate hike at the September 20 Federal Open Market Committee (FOMC) meeting and a 43% probability of a similar hike at the November 1 FOMC meeting.
Global Bond Yields
Global bond yields show mixed movement. The 10-year T-note yield rose to 4.342%, up by +1.6 basis points, while the 10-year German bund yield reached 2.690%, up by +2.5 basis points. Conversely, the 10-year UK gilt yield fell to 4.380%, a 1.5-week low, and is down -3.5 basis points.
Global Stock Markets
Overseas stock markets are experiencing declines, with the Euro Stoxx 50 down by -0.60%. China’s Shanghai Composite Index closed -0.45% lower, and Japan’s Nikkei Stock Index closed -0.21% lower.
European Market Factors
European stocks are facing downward pressure due to reports suggesting that the ECB expects Eurozone inflation to remain above 3% next year. This has pushed European government bond prices higher, resulting in the rise of the 10-year German bund yield. Additionally, weaker-than-expected Eurozone industrial production data has weighed on European stocks.
While European carmakers initially rallied following the European Union’s announcement of an investigation into Chinese subsidies for electric vehicles, concerns about potential backlash from Chinese authorities reversed these gains.
Chinese Market Factors
In China, several factors are influencing the markets. Chinese suppliers to Apple are facing challenges after the Chinese government raised concerns about “security incidents” with Apple’s iPhones. This follows reports that Chinese authorities may restrict the use of Apple products in sensitive departments and state-owned companies. On the positive side, Chinese travel stocks and tourism-related companies rallied after Thailand announced the waiver of visa requirements for travelers from China. Additionally, Chinese property stocks gained amid reports that developer Country Gardens secured a yuan bond extension.
Japanese Market Factors
Japan’s Nikkei Stock Index has also seen slight declines, primarily driven by weakness in Japanese technology stocks, mirroring the -1% drop in the Nasdaq 100 Stock Index on Tuesday. Furthermore, Japanese suppliers of Boeing faced challenges after Boeing reported delays in deliveries of 737 Max jets due to a manufacturing defect. However, Japanese stocks rebounded partially on better-than-expected economic reports for August producer prices and Q3 BSI large manufacturing business conditions. Japanese tire companies also gained momentum after Citigroup expressed a bullish outlook for the sector, citing improving demand and benefits from the shift to electric vehicles.
Earnings Reports (September 13, 2023)
Today’s notable earnings reports include Cracker Barrel Old Country Store (CBRL), DZS Inc (DZSI), EVI Industries Inc (EVI), IBEX Holdings Ltd (IBEX), Presto Automation Inc (PRST), Radiant Logistics Inc (RLGT), REV Group Inc (REVG), Selectquote Inc (SLQT), Semtech Corp (SMTC), and Vitesse Energy Inc (VTS).
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