Pre-Market: Stocks Little Changed with US Inflation In-Line with Expectations

The week’s most anticipated economic release came out in pre-market trading today, and the US CPI perfectly matched the consensus estimate at a monthly rate of 0.2%. As the figure calmed inflation fears a bit, stock futures pushed higher initially after yesterday’s slightly bearish session, but the advance is not significant so far, although the mighty Nasdaq continues its charge.

Nasdaq 100 Futures, 4-Hour Chart Analysis

Forex and bond markets are more active, as expected, and the Dollar is notably lower after against most of its peers, while Treasury yields also pulled back after the release. The Yen is the only exception, as the safe-haven currency has been losing ground throughout the day, and the Greenback is still higher compared to it, despite the post-release pull-back.

 

Nikkei 225 Futures, Daily Chart Analysis

The Nikkei was helped by the weakness in the currency, and the Japanese benchmark added 1.5% today, although it remains well behind the US indices, especially the Nasdaq, from a technical perspective. Given the Euro’s strength, it’s not a surprise that European equities are still under pressure, failing to get closer to their all-time highs, even as the US leaders are already breaking out to new heights.

So, while US markets are bullish short-term, the overall equity picture is still far from convincing, and as the Nasdaq is getting slightly overbought, shorting the laggards with smaller positions could be a good way to trade the divergences here.

Heads are Rolling in the White House

Donald Trump’s administration continues to rapidly change, and Secretary of State Rex Tillerson has been the latest casualty, while the President’s personal assistant was also removed from the White House for “security reasons”.

As for the replacements, CIA Director Mike Pompeo is taking over Tillerson’s post, while Gary Cohn, who left last week, will be likely replaced by CNBC’s Larry Kudlow who is in favor of Trump’s tariff plans. For now, the changes didn’t shake up the markets, and although trade war fears continue to persist, bulls remain in control on Wall Street.

Commodities Higher on Dollar Weakness

Gold Futures, 4-Hour Chart Analysis

Gold rebounded above $1325, as the Dollar pulled back following the CPI report, while crude oil is also up slightly after yesterday’s sell-off, while industrial metals are also modestly up, thanks to the risk-on sentiment.

USD/CAD, 4-Hour Chart Analysis

 currencies are still drifting higher too, although they are still strongly lagging the leading risk assets. So with stock volatility dropping, traders could be in for a choppy day amid the increasing divergence between global markets.

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Author:
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.