The ASX is set to edge higher today following a busy day on Wall Street.
US markets rallied as Americans indulged in the spectacle of the Superbowl, kept one eye on the sky for spy balloons and anticipated the latest US inflation data – though perhaps not simultaneously.
"While the world keeps a nervous eye on the game of tit-for-tat balloon shootdowns between the US and China, stocks have moved higher but all the moves today feel like a placeholder ahead of tomorrow's CPI figures," IG analyst Chris Beauchamp said. "These have the potential to shift the narrative dramatically."
Wall Street rally
The Dow Jones index was up 1% to 34,208 at 7:30am AEDT, while the Australian dollar was higher at around 69.65, up 0.7%.
The S&P 500 gained 46.50 points, or 1.15%, closing at 4,137 points, the Nasdaq gained 174.12 points, or 1.49%, to 11,892, while the Dow Jones rose 374.45 points, or 1.11%, to 34,244.
Over the year to date, the S&P 500 has gained about 8% but remains down around 14% from its record high close in January 2022.
As quarterly reporting season draws to a close, 69% of the S&P 500 firms that have reported results so far have exceeded profit expectations, according to Refinitiv data.
What’s inflation doing in the US?
US economic data from the University of Michigan revealed consumer sentiment rose from 64.9 to an 11-month high of 66.4 in February.
Five-to-10-year inflation expectations were steady at 2.9%. The US Government budget deficit stood at US$38.8 billion in January.
Last year we saw the US cost of living reach highs not seen since the 1980s, heralding the first of the Federal Reserve’s interest rate hikes to curb inflation.
The expectation is that the US Consumer Price Index will increase by around 0.4% for January, bringing the annual rise to 6.2%.
“Expectations are for monthly inflation to rise by 0.4% due to higher gasoline prices,” said IG analyst Tony Sycamore. “However, headline inflation is expected to fall to 6.2% year-on-year from 6.5% year-on-year, the lowest since October 2021. Core CPI is expected to fall to 5.5% year-on-year from 5.7% year-on-year.
“Presuming headline inflation does print at 6.2% (0.4% month-on-month) or lower, it will likely see US equity markets test and break recent highs. However, should the number print at 6.5% or higher, stocks will be belted, and yields and the US dollar will rip higher.”
Oil up; metals mixed
Global oil prices continued their strong run as the markets weighed Russian plans to cut crude production and short-term demand concerns ahead of US inflation data.
Following last week’s devastating earthquake, loadings of Azeri crude at the Turkish port of Ceyhan have resumed.
Brent crude was up by 22 US cents or 0.3% to US$86.61 a barrel, while the US Nymex crude price gained 42 US cents or 0.5% to US$80.14 a barrel.
Base metal prices were mixed on Monday, with copper futures up 1.5% on supply concerns after Freeport-McMoRan suspended mining at Grasberg in Indonesia due to mudflow.
Conversely, aluminium futures price lost 1.7% as surging inventories in London Metal Exchange-approved warehouses bothered the market.