Global markets experienced a robust rally driven by gains in the technology sector, buoyed by optimism ahead of crucial US economic data expected to provide insights into easing inflation pressures. European futures and Asian stocks posted gains, while US stock futures remained steady amidst anticipation of the upcoming inflation report.
The Euro Stoxx 50 contract advanced by 0.2% as the rally in major global tech stocks propelled shares to record highs across international markets. This surge in tech stocks underscored investor confidence amid expectations of continued economic recovery and potential easing of monetary policies by central banks.
Meanwhile, the US dollar weakened against most major currencies as investors positioned themselves ahead of the release of the Consumer Price Index (CPI) data for June. The core CPI, which excludes volatile food and energy prices and is considered a more reliable gauge of underlying inflation, is forecasted to increase by 0.2% for the second consecutive month. This steady rise in core inflation is viewed favorably by Federal Reserve officials, potentially paving the way for interest rate cuts later this year.
Market analysts and economists anticipate that the upcoming CPI report will reinforce the Federal Open Market Committee’s (FOMC) confidence in the trajectory of inflation. Anna Wong, from Bloomberg Economics, commented, “June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory. That should set the stage for the Fed to start cutting rates in September.”
Investors are closely monitoring the futures market, which currently reflects expectations of two Federal Reserve interest rate cuts in 2024, with the likelihood of the first cut occurring as early as September. This sentiment is supported by the moderate pace of inflation as indicated by recent economic data.
The rally in global markets underscores the ongoing optimism surrounding economic recovery and the role of technology stocks in driving equity gains. As markets await the US inflation report, the focus remains on how the data will influence monetary policy decisions, shaping investor sentiment in the coming months.
