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10.08.2023 01:54 PM
US premarket for August 10: Stock market holds steady ahead of inflation data

US stock index futures kicked off the day with gains. S&P 500 futures rose by 0.3%, while NASDAQ gained 0.4%. Stoxx Europe 600 saw a 0.3% jump. France's CAC40 surged by 1% following China's travel restrictions lifted.

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Clearly, market sentiment remains positive as investors anticipate key US inflation data. This information could provide insights into the Federal Reserve's next moves. The US Consumer Price Index report holds significant weight for investors gauging the possibility of a halt in interest rate hikes by the Fed. Projections suggest the data might signal a second consecutive decrease in core inflation, still far from the Fed's 2% target. Economists foresee a mere 0.2% growth in the core Consumer Price Index in July, following a similar increase in June.

Meanwhile, a higher-than-expected reading will likely trigger short-term volatility in stocks and bonds, intensifying pressure on stock indices. However, many economists predict this will not significantly alter expectations regarding the peak of interest rates by the Fed. This is because various indicators suggest economic disinflation, a point underscored by Fed officials this week. They believe the interest rate might be near its peak but have not ruled out a final quarter-point increase.

The catalyst for this scenario would be inflation. Recent sharp surges in energy prices could negatively impact the overall indicator, which economists estimate will grow by 0.3% in July compared to the previous month. Commodities have rebounded notably after a first-half dip. Crude is trading near its nine-month high, with West Texas Intermediate futures surpassing $84 per barrel after a 3% growth over the past two sessions.

China's Ministry of Culture and Tourism announced the lifting of group travel bans to countries like the US, UK, Australia, South Korea, and Japan. According to Goldman Sachs Group Inc.'s latest estimates, Chinese buyers account for around 25% of luxury goods purchases in Europe, including those made by tourists.

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Meanwhile, treasury bonds remained stable, yielding 4% for the 10-year bonds. The latest major US Treasury bond auction by the Fed is scheduled for later this week, featuring 30-year notes. Despite recent concerns of investor resistance, demand for debt has remained high.

As for the S&P 500 index, demand for the trading instrument has returned, but trading remains within a sideways channel. Bulls have a chance to extend the uptrend, but they need to climb back above $4,515. This move could propel the index to $4,539. Another key target for bulls is maintaining control above $4,557, solidifying their market position. In the event of downward movement due to a decrease in risk appetite, bulls should protect $4,488. A breakthrough would swiftly send the trading tool back to $4,469, paving the way to $4,447.

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