Wall Street set for cautious open ahead of US inflation data
Wall Street markets fell late on Tuesday and U.S. Treasury yields rose after U.S. consumer price data for June pointed to higher costs for some goods, prompting investors to scale back their expectations for U.S. Federal Reserve rate cuts.
The threat of further tariffs also weighed on market sentiment after President Donald Trump on Tuesday said letters notifying smaller countries of their U.S. tariff rates would go out soon. Trump threatened on Saturday to impose a 30 per cent tariff on imports from Mexico and the European Union starting on August 1.
At 1003 GMT, the MSCI World Equity index was down 0.1 per cent on the day, having been knocked off a record-high in the previous session after the inflation data.
The pan-European STOXX 600 was down 0.1 per cent while London's FTSE 100 was up 0.2 per cent.
Britain's annual rate of consumer price inflation unexpectedly rose to its highest in over a year. The pound rose slightly against the dollar after the data.
U.S. stock index futures pointed to a lower open for Wall Street.
Traders will be monitoring U.S. producer price data, due later on Wednesday, to see the extent of the inflationary pressures.
'So far we have yet to see a decisive and meaningful pass-through from tariffs into the inflation readings," said Vas Gkionakis, senior economist and strategist at Aviva Investors.
"It is likely to come, but we'll just have to wait and see the timing and the extent."
The Fed has been keeping interest rates steady as it has waited for indications of the inflationary impact from tariffs, which Chair Jerome Powell had said he expected in the summer. Traders are betting that the Fed will start cutting rates in September.
Trump has railed against Powell for not cutting rates sooner, prompting investor concern about whether the central bank's independence could be eroded.
The U.S. dollar, which hit multi-week highs after Tuesday's data, cooled on Wednesday, with the dollar index at 98.547, little changed on the day.
The euro was up 0.2 per cent at $1.1615.
The benchmark 10-year German Bund yield was little changed at 2.707 per cent and the 10-year U.S. Treasury yield was at 4.4753 per cent, retreating from the previous session's highs.
Investors are also paying attention to earnings data. Bank earnings due on Wednesday include Goldman Sachs, Morgan Stanley and Bank of America.
Oil prices were lower, with Brent crude futures around $68.5 a barrel, as signs of stronger Chinese crude consumption were outweighed by investor caution about the wider economic impact from U.S. tariffs.
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