US stocks and Treasuries showed signs of recovery as oil prices moderated, with investors keenly anticipating the August US inflation report. This report is expected to provide critical insights into whether the Federal Reserve will raise interest rates in the upcoming week. The S&P 500 futures rebounded by 0.5%, and Europe's Stoxx 600 climbed 0.6%. Oracle Corp. saw a significant jump of 7% in early trading, indicating that its data center investments are yielding positive results. Brent crude fell below $104 a barrel, although it remains on track for an almost 8% increase since Monday. The International Energy Agency warned that higher oil prices could negatively impact consumption. Treasuries also gained, particularly at the short end, while the dollar remained largely unchanged. Money markets are currently pricing in a 67% chance of a Fed rate hike this month.
Economists project the consumer price index to have risen by 0.4% in August, an acceleration from the previous month, partly due to increased gasoline costs. However, when excluding the volatile energy and food components, the core CPI is anticipated to show a more moderate increase of 0.2%. Guy Miller from Zurich Insurance highlighted Oracle's strong performance as a reminder of the vibrant technology sector, with expectations of robust earnings for at least the next two quarters. The inflationary impact of crude oil was evident as US diesel prices surpassed $6 a gallon for the first time ever. Raphael Thuin of Tikehau Capital noted that equity markets would likely be influenced by bond yields and oil prices in the coming days, acknowledging rising concerns about second-round inflation.
Kevin Thozet from Carmignac expressed confidence that strong earnings would shield US stocks from a downturn, despite the anticipated continued rise in long-term yields. He stated that earnings growth expectations are robust enough to manage an increase in the cost of capital, maintaining a positive outlook on the US stock market. Other significant market movements included the Stoxx Europe 600 rising 0.6%, Nasdaq 100 futures rising 0.6%, and Dow Jones Industrial Average futures rising 0.6%. The yield on 10-year Treasuries declined by two basis points to 4.94%, and Brent crude fell 3.7% to $103.63 a barrel. Spot gold also rose 0.6% to $4,343.50 an ounce.
