(CercleFinance.com) – Wall Street should start falling on Tuesday morning after the publication of the latest inflation figures, stronger than expected and which confirm the scenario of further rate hikes by the end of the year.
Half an hour before the opening, the ‘futures’ contracts on the main New York indices drop from 1.8% to 2.8%, signaling a clear air pocket at the opening of trade.
Consumer price inflation eased slightly in August, due to the sharp drop in gasoline prices, but the slowdown was not as dramatic as expected.
On an annual basis, the consumer price index rose 8.3% last month, after +8.5% in July, according to figures from the Labor Department.
Economists, however, hoped for a more limited increase, around 8.1%.
From one month to the next, consumer prices excluding volatile elements such as energy and inflation even accelerated their progression in August, to +0.6% against +0.3% in July, a sign additional that inflationary pressures are struggling to ebb.
These inflationary tensions, which raise fears of an acceleration of the rate hike by the Fed, come as the institution is due to meet its monetary policy committee next week.
‘The figures for August confirm the warning issued recently by the bosses of the Fed, who consider that the victory over high inflation should not be celebrated too soon,’ said the economists at Commerzbank.
‘The Fed must continue to press the brake pedal, even at the cost of a possible recession’, adds the German bank.
The probability of a 75 basis point hike is now estimated at 82% by traders, while that of a one percentage point hike is estimated at 18%, according to the CME Group’s FedWatch barometer.
On the other hand, no longer any participant today anticipates a rate hike that would be limited to just 50 basis points.
Following the release of inflation figures, the dollar moved back into positive territory against the euro, to once again approach the parity threshold against the European currency.
At the same time, yields on US government bonds increased their lead, returning to a peak of almost three months, at 3.41%, for 10-year Treasuries.
At the opening in New York, European stock markets, which were up this morning, were in the red with the Euro STOXX down 0.4% and the German DAX down 0.2%.
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