Forecast Suggests U.S. Inflation Slowed to 8 Percent in August

Friday's trading on U.S. markets ended with a significant increase in major indices (S&P 500 +1.53%, Nasdaq Composite +2.11%). It looks like markets are trying to gradually move away from negative sentiment associated with strong data on the labor market and, hence, more freedom for the Fed to hike interest rates going forward. The dollar declined ahead of data on Tuesday that is forecast to show headline inflation in the U.S. slowed to 8% in August from 8.5% a month earlier. Meanwhile, U.S. Treasury Secretary Janet Yellen emphasized that the U.S. economy can avoid recession, though that will require "some good luck." She told CNN that while the economy's growth rate was slowing, the labor market remained "exceptionally strong" with almost two vacancies for every worker looking for a job.

Data on U.S. consumer inflation expectations will be released at 11:00 a.m. EST. U.S. consumer inflation expectations for the year ahead, which declined to 6.2% in July, are likely to have fallen further to 6.1% in August. Investors are also awaiting earnings results from Oracle Corporation (ORCL) and Matrix Service Co. (MTRX), due to be released tonight.

Commoditywise, oil prices along with industrial metals’ ones are rebounding as Brent crude futures rose 1% to trade at $93.75 per barrel, while U.S. WTI crude futures rose 0.8% to $87.48 a barrel. However, there is a threat coming from China, which adheres to the policy of "zero COVID", thereby reducing fuel consumption.

On a generally positive note, Bitcoin (BTCUSD) managed to top $22,000 over the weekend and continued its weekly rally ahead of US inflation data. Now the price of Bitcoin is $22,351, while Ethereum (ETHUSD) is trading at $1,774.

European indices had also closed in the green on Friday (+1.09%/+1.23%). Meanwhile, at the time of writing, the Stoxx Europe 600 Index gained 1.08%, The British FTSE 100 rose 1.23% while the French CAC 40 Index added 1.16%, and German DAX climbed 1.6%.

Industrial production in the UK dropped by 0.3% from a month ago in July versus a 0.9% drop in June. The country’s trade deficit also shrank to £7.8 billion in July from £11.4 billion a month ago. The British GDP advanced by 0.2% in July on a monthly basis, compared to a 0.6% decline in June.

Energy stocks and bonds are poised to get a fresh boost from investors positioning to benefit from the surging electricity prices and fuel shortages expected later this year. EU energy ministers on Friday agreed on taxing the revenues of non-gas energy producers. They did not agree, however, on a price cap on Russian energy supplies. EU countries did agree that emergency funds should be offered to utility firms facing soaring collateral requirements and asked the EC to design such measures.

Elsewhere, Asian markets traded generally higher earlier this morning. Among the Asian benchmarks, the markets of Hong Kong and China are closed today, due to the celebration of the Mid-Autumn Festival. Japan’s Nikkei 225 rose 1.16%, Australia’s S&P/ASX 200 rose 1%, while India’s S&P BSE Sensex rose 0.7%. Total passenger vehicles sales in India fell by 4.3% MoM to 281,210 units in August, compared to a 13.1% surge in July.