Wall Street: The inflationary threat returns


(CercleFinance.com) – The New York Stock Exchange should open lower on Wednesday morning, overtaken by fears that inflation will force the Federal Reserve to opt for further rate hikes.

Half an hour before the opening, the ‘futures’ contracts on the main New York indices are all losing around 0.2%, suggesting a continuation of the decline of the previous day.

The recent surge in oil prices has rekindled the threat of accelerating inflation, a prospect that could signal future interest rate hikes.

If the oil market gives in to some profit taking this morning, it had reached new highs since the fall of 2022 yesterday, driven by the decision of Saudi Arabia and Russia to limit their production.

After reaching the threshold of 87 dollars, American light crude (West Texas Intermediate, WTI) lost 0.4% to 86.4 dollars while Brent from the North Sea dropped 0.6% to 89.5 dollars, against more than 91 dollars the day before.

According to analysts, this recovery should continue due to a supply-demand configuration that has no reason to improve by the end of the year.

“Global demand for oil should reach an all-time high in 2023,” notes Alexandre Hezez, the strategist of the Richelieu Group, recalling that China would contribute “massively” to this growth despite recent signs of normalization.

Rising oil prices signal rising inflationary pressures that could prompt the Federal Reserve to raise interest rates further this year, contrary to the prevailing consensus.

While the yield on ten-year Treasuries has fallen a little to 4.25%, it remains at levels close to its annual highs and since the 2008 financial crisis.

On the economic front, market participants will follow the publication of the services ISM at the start of the session, which should show that the sector remains in an expansion zone, a sign of the good health of the American economy.

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