Judgement Day for Inflation

Today is the judgement day for inflation in the U.S. According to a key Federal Reserve Bank of New York survey published yesterday, consumer expectations for next year inflation fell again in August, a potentially promising sign for the U.S. Fed as it tries to cool the surging prices.

Annual inflation in the US likely slowed to 8.1% in August from 8.5% in July, according to the median forecast of economists in a Bloomberg survey. Rental inflation may be close to topping out after advancing almost 6% annually in July. The median expectation is that the inflation rate will be up 5.7% one year from now, a marked decline from 6.2% recorded in June, according to the New York Federal Reserve's Survey of Consumer Expectations. Three years from now, consumers see inflation cooling off slightly to 2.8% – down from the 3.2% recorded last month. Consumers anticipate that prices will drop even further over the next five years, projecting that the inflation rate will hover around 2% in 2027.

Meanwhile, investors are pricing in a more than 90% chance of a 75-basis point increase from the Federal Reserve when it meets next week.

Corporatewise, Peloton Interactive (PTON) chairman and co-founder John Foley announced his resignation from the fitness equipment company as part of a leadership shake-up. The reshuffling extends a tumultuous year for the New York-based company, which in everyone’s focus in the early days of the pandemic but is now suffering from endless decline in sales and mounting losses. Meanwhile, Twitter (TWTR) whistle-blower Peiter Zatko is expected to tell the Senate Judiciary Committee that the company misled its board, investors and clients about the security of its platform and the role of bots. This will be a pivotal moment for the company that billionaire Elon Musk no longer wants to buy.

Commoditywise, crude oil prices are edging higher as Brent crude futures rose 0.95% to trade at $95.17 per barrel, while U.S. WTI crude futures added 1.21% to $89.22 a barrel. The American Petroleum Institute’s report on crude oil stocks will be released later tonight. Meanwhile, gold futures are slightly higher adding 0.22% to $1,728.75 an ounce.

European markets are moderately rebounding today. As of 1:30 p.m. CET, the Stoxx Europe 600 Index gained 0.42%, British FTSE 100 rose 0.35% while the French CAC 40 Index climbed 0.57%, and German DAX gained 0.71%. The annual inflation rate in Germany was confirmed at 7.9% during the month, while the unemployment rate in the UK declined to 3.6% in Q2 to July, posting the lowest since 1974, while average weekly earnings rose by 5.5% YoY to £613 during the same period.

Asian markets ended today’s trading session mostly higher. Thus, Japan’s Nikkei 225 rose 0.25%, China’s Shanghai Composite Index added 0.05%, Australia’s S&P/ASX 200 rose 0.7%, while India’s S&P BSE SENSEX advanced by 0.9%. However, Hong Kong’s Hang Seng Index fell 0.18%. The NAB business confidence index in Australia edged higher 2 points to 10 in August, while the Index of Consumer Sentiment rose by 3.9% MoM during September. Producer prices in Japan climbed by a whopping 9.0% YoY in August, versus market estimates of 8.9%.