US markets were flat again overnight as the S&P500 continues to consolidate just below all-time high resistance levels. Investors in the US will likely remain on the sidelines until either the CPI reading tonight or the FED next week.
Many are hoping to see the FED next week give some indication of when they will be tapering. At some point though we will need to face the reality that Central banks will need to taper Bond Buying. Some countries are already starting to taper like England. The FED is trying to avoid a taper tantrum like we saw a few months back where Bond markets saw strong selling seeing yields jump rapidly. It seems that the FED is already starting to try and prepare markets with many FED officials voicing their view that it is time to start considering tapering. The key piece of detail will be how much they will taper and how quickly, vs how strong economic data is. It is likely the FED will begin discussions on this next week, but a decision and announcement will likely be months away.
The goal is to slowly normalise monetary policy away from the emergency measures adopted over the last 18 months since Covid 19. Markets will want to see this happen in a way that continues to see healthy economic growth. Inflation is good for asset prices, so if the central banks can achieve and maintain their targets of 2-3% inflation whilst removing QE and increasing rates, markets will likely hold gains.
The XJO is expected to edge lower on open this morning following negative leads from the U.S last night. U.S futures sit in the green this morning and our market will be watching them closely throughout our session today to see how they continue to digest last night’s CPI data.
We are tracking sideward at the top of the range – a well-deserved rest from the recent bull run. Yesterday we once again made fresh intraday all-time highs, but were unable to hold our nerve and sold off by close. The recent consolidation range seems to be finding support at roughly 7260 and the accelerated uptrend line remains in play. This should help keep our market buoyed but if the U.S falls on the back of the new CPI data then 7200 is the next target.
US shares closed slightly lower overnight in a quite session of trading ahead of tonight’s CPI/inflation data. There was little in the way of fresh economic data overnight, though an oil inventory report did show a greater drawdown in US oil inventories than expected; this wasn’t enough to push oil higher however. Seven of the eleven sector groups on the S&P 500 closed lower, with Financials stocks faring the worst, whilst Utilities and Healthcare stocks were the strongest performers overnight.