So, what’d I miss?
It’s been quite a buzzing start to the week but today, it seems that markets might settle for doing nothing – at least in European morning trade. The US inflation data is looming later and I suspect European traders might be more than happy to sit on their hands until then.
US CPI day means that the inflation numbers will be the main event for markets. As such, I wouldn’t expect much excitement in the hours to follow as traders keep their powder dry ahead of the release; that unless we get some surprise headlines during the session.
The October report is expected to show headline inflation rising by 0.3% m/m, easing from 0.6% in September. Meanwhile, core inflation is estimated to slow to 0.2% m/m, down from 0.3% previously.
Just be wary though that there is an important caveat to the release this time around. The BLS will not be publishing the usual annual comparisons for today’s report, owing to missing October 2025 data during the government shutdown last year. As such, that puts even more emphasis on the monthly readings.
The bigger question later today is whether the numbers will give markets another reason to feel better about themselves, especially after tech shares have rebounded quite well since the selloff last week.
The Nasdaq gained another 2.7% yesterday while the S&P 500 climbed by 2.3% as risk appetite recovered alongside a sharp decline in oil prices. Even though tech shares have found their footing again, concerns surrounding AI spending and potential regulatory hurdles haven’t exactly disappeared.
As such, today’s inflation report might be one to help tip the balance of scales in that regard.
A softer report could offer some welcome relief for equities, particularly if it helps temper expectations for another Fed rate hike in December. Meanwhile, a hotter print risks throwing another spanner in the works considering that the recent recovery is still finding its legs. Hotter inflation could spark Treasury yields to nudge higher again and weigh on the already expensive tech valuations further.
But for now, I suspect traders will be reluctant to chase the rebound too aggressively before getting a clearer inflation signal.
In any case, Europe will be facing a quieter session in the day ahead with the real fireworks reserved for the US data later today.
This article was written by Justin Low at investinglive.com.
