Pre-Market Brief: Stocks Climb As Cooling Inflation Eases Rate Fears

December S&P 500 futures (ESZ22) are trending up +0.51% this morning after three major US benchmark indices jumped on Thursday, posting their best daily advances since 2020 as a sign of slowing inflation in October bolstered hopes the Federal Reserve might become less aggressive with interest rate hikes going forward. Three major U.S. stock indexes were fueled primarily by gains in the Technology, Consumer Services, and Financials sectors.

In Thursday's trading session, three major US benchmark indices notched their largest one-day percentage advances in about 2-1/2 years as inflation fell to a 9-month low in October. Consumer prices rose 7.7% y/y from a year earlier, down from 8.2% y/y in September and well below the 8.0% y/y consensus forecast. Core inflation, which is considered a more accurate gauge of inflation, slowed to 0.3% m/m from 0.6% m/m, clearly below the 0.5% m/m forecast. The headline rate of inflation has now fallen for four straight months, from a peak of 9.1% y/y in June, standing at its lowest rate since January. 

"This is a big deal. We have been calling the peak of inflation for the last couple of months and just have been incredibly frustrated that it hasn’t shown up in the data. For the first time, it has actually shown up in the data," said King Lip, chief strategist at Baker Avenue Asset Management in San Francisco.

On the ground of the recent inflation data, U.S. rate futures have priced in an 85.4% chance of a 50 basis point rate increase and a 14.6% chance of a 75 basis point hike at December's monetary policy meeting. 

San Francisco Fed President Mary Daly and Dallas Fed President Lorie Logan cheered the latest inflation data but indicated that the fight with growing prices was far from over.

"Inflation turned down because core goods inflation finally turned strongly negative," said Peterson Institute fellow Jason Furman.

Today, all eyes are focused on the U.S. Michigan Consumer Sentiment preliminary data in a couple of hours. Economists, on average, forecast that November Michigan Consumer Sentiment Index will stand at 59.5 compared to the previous value of 59.9.

Also, investors are likely to focus on the U.S. November Michigan Consumer Expectations preliminary data. Economists estimate this figure to come in at 56.0, compared to the previous figure of 56.2.

In the bond markets, United States 10-Year rates are at 3.811%, down -0.48%.

The Euro Stoxx 50 futures are up +0.47% this morning, extending the previous session’s U.S. inflation-backed rally, even as economic data pointed to the U.K. entering a recession. The U.K. released its latest preliminary GDP growth data, showing that the economy contracted -0.6% m/m in September and fell -0.2% q/q in the third quarter. At the same time, GDP stood at +2.4% on a year-over-year basis, stronger than expectations of +2.1% y/y.

In addition, U.K. Manufacturing Production, U.K. Trade Balance, U.K. Business Investment, and Germany CPI data were released today.

U.K. September Manufacturing Production has been reported at 0.0% m/m, stronger than expectations of -0.4% m/m.

U.K. September Trade Balance stood at -15.66B, stronger than expectations of -18.75B.

U.K. Business Investment preliminary data came in at -0.5% q/q in Q3, weaker than expectations -0.3% q/q.

The German October CPI was at 10.4%, in line with expectations.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.69%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.98%.

China’s Shanghai Composite surged on Friday after the Hong Kong government eased some COVID-related curbs, bolstering hopes over a broader withdrawal of restrictions. The Hong Kong government said on Thursday that it plans to relax COVID-19 restrictions next week by allowing international arrivals to travel around the city. At the same time, Chinese authorities on Friday shortened quarantine times for residents and inbound travelers.

Japan’s Nikkei 225 Stock Index closed sharply higher today and hit a 1-month high after softer-than-expected U.S. inflation reading indicated a slightly less hawkish outlook for interest rates. The index's upward momentum was fueled by gains in the Shipbuilding, Paper & Pulp, and Food sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.61% to 20.87.

Pre-Market U.S. Stock Movers

Doximity Inc (DOCS) climbed more than +19% in pre-market trading after the company reported upbeat Q2 results and provided favorable FY2023 guidance.

ASML Holding NV ADR (ASML) rose over +2% in pre-market trading, extending yesterday's gains after the company announced a share buyback program of up to EUR 12B.

Matterport Inc (MTTR) jumped about +17% in pre-market trading, extending yesterday's gains after the company provided upbeat Q3 results.

SoundHound AI Inc (SOUN) gained about +14% in pre-market trading after the company reported better-than-expected Q3 earnings.

GSK plc DRC (GSK) plunged over -4% in pre-market trading after UBS downgraded the stock to sell from neutral.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - November 11th

SoftBank Group (SFTBY), Softbank Group Corp. (SFTBF), Zurich Insurance Group (ZFSVF), Rosneft DRC (OJSCY), Lonza Group AG (LZAGY), Fortescue Metals (FSUMF), Credit Agricole SA PK (CRARY), Citic ADR (CTPCY), Olympus Corp (OCPNY), Naturgy Energy ADR (GASNY), China Resources Beer ADR (CRHKY), Atlantia ADR (ATASY), Trip.com ADR (TCOM), Surgutneftegaz ADR (SGTZY), Polyus ADR (OPYGY), Shaw B (SJR), Siemens Gamesa ADR (GCTAY), Brookfield Renewable (BEPC), Suntory Beverage & Food (STBFY), Sonic Healthcare ADR (SKHHY), Brambles ADR (BXBLY), Polestar Automotive Holding A (PSNY), ASX ADR (ASXFY), Koc Holdings AS (KHOLY), Kepco ADR (KEP), SK Telecom ADR (SKM), Rakuten ADR (RKUNY), Algonquin Power (AQN), Signify Health (SGFY), Woori Financial (WF), KT (KT), Nedbank Group Ltd (NDBKY), Allkem (OROCF), Dai Nippon Printing ADR (DNPLY), Energy of Minas Gerais (CIG), Grupo Simec ADR (SIM), Onex Corp (ONEXF), Knowbe4 (KNBE), A2A ADR (AEMMY), Shizuoka Bank ADR (SHZUY), Unipol ADR (UFGSY), Stepstone (STEP), Marui ADR (MAURY), San Miguel ADR (SMGBY), Beijing Capital Airport ADR (BJCHY), SBM Offshore (SBFFF), SBM Offshore ADR (SBFFY), Autogrill ADR (ATGSY), Wienerberger Baustoffindustrie (WBRBY), Valneva SE (VALN), Aozora Bank ADR (AOZOY), NantKwest Inc (IBRX), iQIYI (IQ), Embraer ADR (ERJ), Bumi Resources ADR (PBMRY), Piraeus Bank ADR (BPIRY), Banco Macro B ADR (BMA), Embotelladora Andina (AKOa), HUTCHMED DRC (HCM), Embotelladora Andina B ADR (AKOb), Meridian (VIVO), Central Puerto (CEPU), Sabine Royalty Trust (SBR), Naas Tech ADR (NAAS), Wacoal (WACLY).

• Stocks Skyrocket as Yields Plunge on a Soft U.S. CPI Report
• Hopes are Building for Tech Earnings to Stabilize
• Stocks Soar as Bond Yields Plunge on Soft U.S. Consumer Prices
• Markets Today: Stocks Rocket Higher as U.S. Inflation Concerns Ease