Pre-Market: Inflation Fears Subside as US CPI, Retail Sales Miss

Global stocks are sporting modest gains today just after the US opening bell, with the Nikkei continuing its strong rally, the Dow hitting its highest level since the January highs, and the Nasdaq and the S&P 500 pushing towards their all-time highs yet again. The S&P 500 is now just a hair below its record high, and the most important global index might close the week in uncharted territory.

S&P 500 Futures, 4-Hour Chart Analysis

European and emerging markets are far from being that rosy with the most important benchmarks barely leaving the vicinity of their recent lows despite this week’s risk-on shift in global sentiment. The divergence between the US and the rest of the world is still widening, although yesterday’s 6% rate hike by the Turkish central bank followed by today’s similarly surprising move by the Russian central bank caused a rally in emerging market currencies, helping sentiment in the weaker markets.

USD/TRY, 4-Hour Chart Analysis

In economic news, the US indicators showed a mixed picture, while China showed signs of stability after a period of pronounced weakness. Chinese retail sales and industrial production both came in slightly above forecast and that gave a small boost to the struggling equity markets of the region.

US retail sales missed across the board, with the headline number rising just 0.2% and core sales ticking higher by 0.1%, although last month’s blowout numbers were revised even higher. Industrial production and the UOM consumer sentiment index both beat the consensus estimate, with the former increasing by 0.4% vs. the expected 0.3% and the latter jumping unexpectedly to 100.8 compared to the forecast 96.7.

Dollar Bounces Off Two-Week Low Against Euro

EUR/USD, 4-Hour Chart Analysis

Following yesterday’s CPI miss and Mario Draghi’s inflation warning, the EUR/USD hit a moiré than two-week high above 1.17, but today, the pair pulled back, failing to maintain the bullish momentum. The rise in US yields seems unstoppable before next week’s Fed meeting, and that could mean that the Greenback will shortly resume its rally, even following the lower than expected US inflation indicators.

From a longer-term perspective, risk assets outside the US still seem to be just correcting the recent selloff, and the coming third rate hike by the US central bank could push emerging markets to turmoil again.

Copper Futures, 4-Hour Chart Analysis

Copper also attempted a rally in the past few days, and it reached up above $2.7 again, but despite the short-term gains the metal is still very close to its 15-month low, and the declining trend might soon resume, given the lack of bullish momentum.

Elsewhere in commodities, gold continues to be stuck near the $1200 per ounce level, while crude oil pulled back sharply after the early-week rally, with the WTI contract falling back to $68 per barrel on growing global growth worries.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.