All eyes turn to the ECB after a slight jump in US inflation

US equities were mixed Wednesday after the latest round of inflation data generally met expectations, though the numbers probably did little to clarify the future course of interest rates. The Dow Jones closed 70 points lower, while the S&P 500 and Nasdaq were up by 0.1% and 03% respectively. Despite the day’s moderately mixed conclusion, there were signs investors may be bracing for economic trouble. Some “defensive” sectors that are typically considered to be recession safe havens led gains Wednesday, while utilities closed at a one-month high. Also, the Russell 2000 Index, composed of smaller companies potentially more exposed to an economic downturn, dropped to its lowest level since late June. In Europe, markets fell on Wednesday, with the Euro Stoxx 50 Index down 0.4% dragged by retail shares.  

Summary for 14.09.2023 

• Most Asian shares rose slightly this morning, with the Nikkei 225 outperforming the rest of the region as a swathe of weak economic readings drove bets that the Bank of Japan will still need to maintain negative interest rates for the time being. Elsewhere shares in Australia and South Korea were also higher while Hong Kong and mainland China equities were sluggish. 
• European shares are on course for a higher open ahead of the ECB’s policy decision. Meantime, US equity futures also pointed to a positive start as investors look ahead to the August producer price index report to guide the economic and interest rate outlooks further. 
• Oil climbed toward a 10-month high after the International Energy Agency added to warnings of a supply shortfall. West Texas Intermediate traded near $89 a barrel in Asia, after dipping 0.4% on Wednesday. Demand will eclipse supply by 1.2 million barrels a day on average during the second half, the IEA projected Wednesday. The bullish outlooks added momentum to a rally that started in mid-June as Saudi Arabia and Russia curbed supply while US and Chinese demand proved relatively resilient. WTI has risen 13% over the past three weeks. 
• The annual inflation rate in the US accelerated for a second straight month to 3.7% in August from 3.2% in July, above market forecasts of 3.6%. Oil prices have been on the rise in the previous two months, which coupled with base effects from last year, pushed the inflation higher. Core inflation rate however, which excludes food and energy, slowed for the fifth month to 4.3%, in line with market expectations. Markets now see a 97% chance that the Fed would hold rates steady at next week’s meeting, while bets for a rate hike in November have eased.  
• The European Central Bank’s dilemma over whether to deliver a 10^th straight interest-rate increase later today hinges chiefly on how quickly its forecasts show inflation retreating. The new price outlook has the capacity to settle what’s become a cliffhanger of a meeting: 34 economists survey by Bloomberg predict a hold, while 32 foresee a hike. Money markets place meantime place two-in-three odds on another increase. 
• Arm Holdings priced its initial public offering at the top end of its range to raise $4.87 billion in the largest listing of the year. The chip designer, which is owned by SoftBank, sold 95.5 million American depositary shares for $51 apiece. The IPO is the world’s biggest this year, surpassing the $4.37 billion listing by Johnson & Johnson consumer health spinoff Kenvue.  
• American Airlines shares sank nearly 6% yesterday after the company lowered its third-quarter profit forecast, citing higher fuel prices and costs from a new labour agreement with pilots. 
• Citigroup shares rose 1.7% after CEO Jane Fraser early on Wednesday announced a corporate reorganisation aimed at reversing a downturn in the bank’s shares. 
• Ford Motor. Co shares rose 1.6% yesterday after a UBS analyst initiated coverage of the company with a “buy” rating, saying that the near-term impact of a potential United Auto Workers strike has been priced in. Additionally, UBS upgraded shares of General Motors to a “buy” from “neutral.” 
• Moderna shares rose 3.3% a day after the Centers for Disease Control and Prevention cleared the pharmaceutical company’s updated Covid vaccine.