US EARLY MORNING: Equity index futures are flat; US CPI data today is expected to show a cooling of annual price pressures

US PREMARKETS: US equity futures are trading with modest gains ahead of today’s CPI data, which is expected to a show a cooling in the annual rates of inflation. Treasury yields are narrowing, with the short-end outperforming. The Dollar Index is flat. Headline consumer prices are expected to rise by 0.3% M/M in June (prev. +0.1%), although the annual rate is expected to cool to 3.1% Y/Y from 4.0%; the core measure of inflation is expected to rise 0.3% M/M (slightly softer than the prior pace of +0.4%), while the annual rate of core inflation is seen cooling to 5.0% Y/Y from 5.3%. Analysts say that the easing of annual core inflation would be a welcome development for the Fed. Hopes of cooler inflation were supported this week in wake of the Manheim data on used car prices, while a New York Fed Consumer Expectations Survey also alluded to cooling inflation dynamics, with expectations of near-term inflation falling to the lowest since April 2022. Both these prints helped to offset some of the fears seen in wake of last week’s US jobs data, where the rate of annual average earnings ticked up unexpectedly. Meanwhile, today’s CPI data itself is likely to show declines in the volatile used auto prices component after a period of strong increases, while other goods categories are likely to have minimal inflation. Analysts also expect that services inflation including shelter will continue to inch lower, while some - like analysts at Credit Suisse - say that the ex-shelter measure may come in slightly below 0.3%. CS is slightly below consensus in looking for core inflation to rise 0.2% M/M; it says that a reading in-line with its estimates would represent the lowest run rate for core inflation in 22 months, and the first time core inflation has been broadly in-line with target over that period. The bank cautions that the decline is likely to be exacerbated by volatile components, which could reverse higher later in the year, but nonetheless, this would be encouraging for the Fed after months of disappointment.

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12 Jul 2023 - 09:30- EquitiesData- Source: Newsquawk

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