by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to fall on Wednesday before the publication of monthly data on consumer prices in the United States which could influence the monetary policy decisions of the Federal Reserve (Fed) next week.

According to the first available indications, the Parisian CAC 40 should lose 0.44% at the opening, the Dax in Frankfurt 0.45% and the FTSE 100 in London 0.38%. The EuroStoxx 50 index is expected to decline by 0.42%.

The markets will learn US inflation figures for the month of August at 12:30 GMT. The Reuters consensus forecasts an acceleration in consumer price inflation (CPI), to 0.6% month-on-month (compared to +0.2% in July), and 3.6% year-on-year. (compared to +3.2% the previous month). On the other hand, basic inflation, known as core CPI, is expected to slow to 4.3% over one year.

In this context, investors should opt for caution, especially since the recent surge in oil prices has awakened fears of persistent inflation.

“People are a little worried about the rather aggressive rise in energy prices in recent weeks, and that gives rise to some concerns for the horizon until November,” a month in which some investors anticipate that the Fed will raise rates again after an expected pause for the September 20 meeting, commented Thomas Hayes, president of Great Hill Capital.

“All the elements we receive between now and the November meeting will be important, particularly those related to inflation,” added Art Hogan, market strategist at B Riley Wealth.

Investors are also awaiting industrial production figures in the euro zone for the month of July, while in Great Britain, gross domestic product (GDP) contracted more than expected in July, by 0.5%, according to figures published Wednesday by the ONS.

A WALL STREET

The New York Stock Exchange ended lower on Tuesday amid rising oil prices, while Oracle weighed on new technologies after reporting gloomy forecasts.

The Dow Jones index lost 0.05% to 34,645.99 points.

The broader S&P-500 lost 0.57% to 4,461.91 points.

The Nasdaq Composite fell 1.04% to 13,773.62 points.

Oil prices confirmed their recent upward trend and fueled speculation that persistent inflation is pushing the Fed to maintain high interest rates for longer than expected.

Oracle fell more than 13% on Tuesday, reaching its lowest level since June, after announcing a lower-than-expected revenue target for the current quarter.

This contributed to the decline of other cloud computing giants, Amazon and Microsoft, both down more than 1%, also affected by the rise in bond yields.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index lost 0.21% to 32,706.52 points and the broader Topix fell 0.05% to 2,378.64 points at the close. Stocks likely to resist a rise in interest rates such as the telecoms operator KDDI (+1.58%) limited the decline in the indices.

The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) fell by 0.3%.

In China, the Shanghai SSE Composite lost 0.95% and the CSI 300 lost 1.06%.

VALUES TO FOLLOW IN EUROPE:

Inditex, the owner of the Zara brand, reported on Wednesday a 40% jump in its profit for the six months to July, a figure higher than expected.

EXCHANGES/RATES

While awaiting US inflation figures, the dollar is rising slightly (+0.15%) against a basket of reference currencies.

The Japanese currency, which recently benefited from comments by the Governor of the Bank of Japan (BoJ), Kazuo Ueda, on a possible end to negative rates, is falling again, to 147.29 yen per dollar.

The euro is trading at 1.0736 dollars, practically unchanged (-0.15%), on the eve of the monetary policy decisions of the European Central Bank (ECB).

In the bond market, the yields on ten-year and two-year Treasuries move within a narrow range, each gaining around 2.5 basis points, to 4.2902% and 5.0242% respectively.

The German Bund yields on these two maturities are respectively 2.658% (+1.8 basis points) and 3.15% (+2.6 basis points).

OIL

The oil market is at a nearly ten-month high ahead of the release of US inflation data as investors try to sort through disruptions to Libyan production, OPEC+ supply cuts and unfavorable developments in the global economy.

Brent gained another 0.17% to $92.22 per barrel and American light crude (West Texas Intermediate, WTI) rose 0.24% to $89.05 after a jump of nearly 2% at the close on Tuesday.

(Written by Claude Chendjou, edited by Jean-Stéphane Brosse)

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