U.S. stock futures rose in pre-market trading on Friday as investors focused on the PCE index report for July. This inflation data, closely watched by the Federal Reserve, could influence the Fed’s future monetary policy decisions.
As of 4:58 AM, Dow Jones futures (DOWI:DJI) gained 56 points, or 0.14%. S&P 500 futures rose 0.38%, and Nasdaq-100 futures advanced 0.64%. The 10-year Treasury yield was at 3.856%.
On today’s U.S. economic calendar, at 8:30 AM, personal income and personal spending data for July will be released, both expected to rise by 0.2% and 0.5%, respectively, compared to the previous values of 0.2% and 0.3%. The PCE index for July is expected to increase by 0.2%, up from 0.1%, and the core PCE is forecasted to rise by 2.7% year-over-year, above the previous 2.6%.
At 9:45 AM, the Chicago Purchasing Managers’ Index (PMI) for August will be released, with a forecast of 45.6, slightly above the previous 45.3. At 10:00 AM, the final consumer sentiment index for August is expected to be 68, compared to 67.8 the previous month.
In the commodities market, oil prices rose due to supply concerns in Libya and Iraq, which could impact global supply. However, weakened demand in China limited the gains. Despite recent increases, both Brent and WTI are on track for consecutive monthly declines, reflecting concerns over future demand and expectations that OPEC+ may delay the end of production cuts.
West Texas Intermediate crude for October rose 0.22% to $76.08 per barrel, while Brent for October rose 0.29% to $80.17 per barrel.
Industrial metals are recording monthly gains, led by zinc and aluminum (CCOM:ALUMINUM), due to robust growth in the U.S. and a weaker dollar. The LMEX Index rose nearly 3% in August, with zinc advancing 8% and aluminum nearly the same. Copper (CCOM:COPPER) also rose despite increased inventories and the economic slowdown in China.
Asia-Pacific markets closed higher on Friday. Mainland China’s CSI 300 advanced 1.33%. Japan’s Nikkei 225 reached 38,647.75, up 0.74%, while South Korea’s Kospi grew 0.45%. Australia’s S&P/ASX 200 closed up 0.58%, nearing its all-time high. Hong Kong’s Hang Seng rose 1.44% in the final hour of trading.
In Australia, retail sales remained flat in July after two months of growth, suggesting that tax cuts have yet to boost consumption. The 2.3% year-over-year increase in sales was lower than population growth, indicating weakened consumption. This slowdown raises expectations that the Reserve Bank of Australia may cut interest rates sooner.
In Japan, the unemployment rate rose to 2.7% in July, up from 2.5% in June, exceeding economists’ forecast of 2.5%. Meanwhile, the job-to-applicant ratio rose to 1.24, surpassing the expectation of 1.23, according to data from the Ministry of Labor.
Core inflation in Tokyo accelerated for the fourth consecutive month in August, reaching 2.4%, above the Bank of Japan’s 2% target, fueling expectations of future rate hikes. This increase reflects reduced government subsidies and rising rice prices. The BOJ may continue raising rates if inflation remains high. In July, the country’s retail sales rose 2.6% year-over-year, below Reuters’ projected growth of 2.9% and also below the revised 3.8% increase recorded in June.
Japanese steelmaker Nippon Steel is concerned about the increase in steel exports from China, which could negatively impact the Japanese market. The company is pressuring the Japanese government to impose anti-dumping tariffs on Chinese steel, worried that Japan could become the primary destination for Chinese exports, especially with China’s increased exports and declining domestic demand.
The Nikkei 225 is set to record the largest monthly variation in 34 years, with a difference of 7,625 yen between the intraday high and low. This volatility, driven by interest rate hikes by the Bank of Japan and signs of a U.S. slowdown, is the highest since August 1990, but may stabilize from September, according to Bloomberg.
In China, the central bank intends to focus on the cost of credit rather than volume, but faces challenges with liquidity risks and uncooperative markets, according to Reuters. While it wants to give more prominence to markets in resource allocation, the economy’s dependence on state investments and liquidity needs make this transition difficult.
China is considering allowing homeowners to refinance up to $5.4 trillion in mortgages to reduce costs and boost consumption. The plan includes renegotiating terms with current lenders and the possibility of switching banks, something not allowed since the global financial crisis. This aims to alleviate the financial burden on households and stimulate the economy, though it could pressure bank profits. The measure also seeks to address the economic slowdown and the real estate crisis.
According to Reuters, residential property prices in China are expected to fall 8.5% in 2024, more than previously expected, and 3.9% in 2025. Additionally, China’s industrial activity is set to shrink for the fourth consecutive month in August, with the PMI projected at 49.5, below the growth threshold. The post-Covid economic recovery has been slower than expected, with the declining real estate sector affecting consumption. Beijing has signaled the need to stimulate domestic consumption, but concrete details are still awaited.
Chinese automakers such as MG and BYD faced a drop in electric vehicle sales in Europe in July due to new high tariffs and a general decline in demand. In July, registrations of Chinese EVs fell to 9.9% of the market, compared to 10.2% last year. BYD had a sequential drop of 5.5% in sales, while MG saw a 38% reduction from last year.
On Friday, major Chinese state banks bought dollars to curb the yuan’s appreciation, which reached 7.0895 per dollar, the highest level in eight months. These actions aim to prevent a sudden rise in the currency, which could negatively impact financial markets and exporters.
In South Korea, retail sales fell 1.9% month-on-month compared to June. On an annual basis, retail sales fell 2.1%.
European markets hit a new intraday record, with the real estate and basic resources sectors leading the gains, driven by expectations of interest rate cuts after French inflation data.
Inflation in France fell to 2.2% in August, its lowest level since July 2021, in line with the 2.2% forecast for the eurozone. Economists expected 2.1%. Service inflation rose to 3.1%, which could affect European Central Bank (ECB) rate decisions. France’s second-quarter GDP grew by 0.2%, revised down from the preliminary figure of 0.3% released in July.
French financial assets are stagnant due to the political deadlock following the surprise election called by Macron in June. With a suspended parliament and no defined government, recovery prospects are uncertain, affecting stocks and bonds. The worsening fiscal situation and delayed budget add to market uncertainty.
In Germany, preliminary annual inflation fell to 2% in August, below the forecast of 2.3% and the 2.6% reading in July.
In Spain, preliminary inflation was 2.4%, also below expectations and the 2.9% rate from the previous month. More inflation figures are expected later in the day from Italy and the eurozone.
U.S. stocks performed strongly for much of Thursday but lost momentum late in the session, with the Nasdaq and S&P 500 falling. The Dow Jones rose 243.63 points, or 0.59%, to a record 41,335.05 points. The S&P 500 fell 0.22 points, virtually flat at 5,591.96 points, while the Nasdaq fell 39.69 points, or 0.23%, to 17,516.43 points.
The Commerce Department revised U.S. GDP growth for the second quarter to 3.0%, up from the estimated 2.8%, showing an acceleration from the first quarter’s 1.4%. The downward revision in inflation and increased spending indicate a “soft landing” for the economy, according to Jeffrey Roach of LPL Financial.
Initial jobless claims in the U.S. fell to 231,000 in the week ending August 24, a drop of 2,000 from the previous week. Economists expected claims to remain at 232,000, indicating stability in the labor market.
Nvidia (NASDAQ:NVDA) shares fell 6.4% yesterday despite better-than-expected results. Investors were disappointed by the slowdown in profit growth, with the market’s high expectations for the company souring sentiment.
Before the market opens, quarterly reports will be released by Frontline Ltd. (NYSE:FRO), Jinko Solar (NYSE:JKS), Miniso Group (NYSE:MNSO).