S&P500 futures point to a stronger start as attention turns to PPI inflation, which is expected to cool. A drop in PPI could fuel bets of a less hawkish Federal Reserve.
· US continuing jobless claims show signs of a cooling labour market
· Gold rises towards 1800 ahead of the inflation figures
· Oil is set for a 10% weekly decline as US recession fears hit the demand outlook
Stocks on Wall Street snapped a five-day losing streak on signs that the US labour market could be starting to cool. The number of Americans filing claims for jobless benefits rose moderately to 230K, up from 225k. However, continuing claims were at the highest level since February. This means that those who have lost a job are finding it harder to find a new one.
The data is consistent with the Federal Reserve slowing the pace of rate hikes at the December meeting. The data has also gone some way to calming concerns that arose following last week’s nonfarm payroll report. The November jobs report showed that US employers hired more workers than expected and also increased wages.
The market mood has been data-dependent this week, with investors looking for clues and certainty that the Fed will downshift the pace of rate hikes in next week’s FOMC meeting.
After the stronger close on Wall Street, European stocks are heading for a positive open. The DAX is set to rise 0.35% at the start of trade, the CAC is looking at a 0.3% rise, and the FTSE points to gains of 0.16%. US futures are also heading higher.
PPI
There are no major economic data releases expected in the European session. Instead, attention will be firmly on the release of US PPI data. The measure of inflation at the wholesale level is expected to cool to 7.4% YoY in November, down from 8% YoY in October.
PPI is often considered a lead indicator for CPI. Cooling PPI would suggest that U.S. consumer price inflation could also fall further, fueling bets that the Federal Reserve will adopt a more dovish approach to monetary policy.
A lower-than-expected PPI reading could lift stocks further, as well as non-yielding gold while dragging on the US dollar. Gold is rising for a fourth straight day and is approaching $1800. Cooling PPI could help gold push over this key level and head towards 1850.
Michigan consumer confidence
University of Michigan consumer confidence data is also awaited. Expectations are for consumer morale to fall in December to 53.3, down from 56.8. This could be a case of bad data being good news for the market, as falling consumer sentiment often means less spending, and it’s consistent with a more dovish approach from the Fed.
Oil
Oil prices have fallen across this week, hitting a 2022 low of 71.14 yesterday. While oil prices have picked up marginally and currently trade at 72.00, the move higher appears to lack momentum. The selloff in oil has been stemmed by news of an accident closing Canada’s Keystone Pipeline. However, this will be a short-term closure, and the market could quickly return its attention back to the demand outlook and rising fears of a recession in the US.
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Sources: Bloomberg, CNBC, Reuters
Original article provided by Trading Writers
