FX.co ★ Futures Firmly Positive Following Closely Watched Inflation Data

U.S. index futures are signaling a higher open on Friday, suggesting an upward movement for stocks after yesterday's mixed performance.

The optimism follows a Commerce Department report indicating that U.S. consumer prices in June aligned with economists' expectations. According to the report, the personal consumption expenditures (PCE) price index inched up by 0.1% in June after being unchanged in May, meeting forecasted figures.

Additionally, the annual growth rate of the PCE price index slowed to 2.5% in June from 2.6% in May, again in line with expectations. The core PCE price index, excluding food and energy, rose by 0.2% in June following a 0.1% increase in May, which was above the economists' prediction of another 0.1% rise. However, the annual growth rate for the core PCE price index remained at 2.6%, contrary to the anticipated slowdown to 2.5%.

The inflation figures, preferred by the Federal Reserve, were part of a broader Commerce Department report on personal income and spending. Although personal income grew less than expected, personal spending matched economists' predictions.

Markets might also see gains from bargain hunting after the tech-heavy Nasdaq and the S&P 500 hit their lowest closing levels in over a month on Thursday. U.S. stocks experienced heavy selling during the final hour of the session amid concerns about the earnings of mega-cap firms.

Among the major averages, the Dow Jones Industrial Average settled higher, gaining 81.20 points or 0.2% to close at 39,935.07. It had reached a high of 40,438.82 earlier in the day. The S&P 500 peaked at 5,491.59 before closing nearly 100 points lower at 5,399.22, losing 27.91 points or 0.5%. The Nasdaq dropped 160.69 points or 0.9% to end at 17,181.72, down from a high of 17,544.46.

Earlier in the session, stocks strengthened due to data showing a sharper-than-expected acceleration in U.S. economic growth for the second quarter. The Commerce Department reported that real gross domestic product (GDP) surged by 2.8% in the second quarter, up from 1.4% in the first quarter and above the expected 2% increase.

The GDP growth was driven by increased consumer spending, private inventory investment, and nonresidential fixed investment. Compared to the first quarter, accelerations in private inventory investment and consumer spending primarily contributed to the GDP growth in the second quarter.

On the inflation front, the PCE price index increased by 2.6% in the second quarter, down from 3.4% in the first quarter. Excluding food and energy prices, the core PCE price index rose by 2.9% compared to a 3.7% increase in the previous quarter.

Another Commerce Department report revealed that durable goods orders plunged by 6.6% in June after inching up 0.1% in May, contrary to economists' expectations of a 0.3% rise.

A Labor Department report showed that initial jobless claims fell to 235,000 during the week ended July 20th, down 10,000 from the previous week's revised level of 245,000. Economists had expected claims to dip to 238,000 from the previously reported 243,000.

Among significant losers were Microsoft, Nvidia, Alphabet, Meta Platforms, AMD, Intel, Micron Technology, and Analog Devices, which ended down by 1.4% to 4%. Eli Lilly and Honeywell dropped 4.5% and 5.2%, respectively, while Abbott Laboratories, Texas Instruments, and Qualcomm also saw notable declines.

On the positive side, Tesla, Exxon Mobil, Johnson & Johnson, Home Depot, AbbVie, Chevron, Salesforce, Thermo Fisher Scientific, Danaher, GE Aerospace, Blackstone, Philip Morris, Caterpillar, Morgan Stanley, Goldman Sachs, Citigroup, Bank of America, Boeing, and ADP posted strong gains.

IBM surged 4.3%, reporting a Q2 bottom line of $1.83 billion or $1.96 per share, compared with $1.58 billion or $1.72 per share in last year's Q2.

**Commodity, Currency Markets****Crude Oil and Gold Futures**

Crude oil futures have decreased by $0.38, settling at $77.90 per barrel, after an upward movement of $0.69 to $78.28 per barrel on Thursday. In contrast, gold futures have rebounded by $21.10 to $2,374.60 per ounce, following a significant drop of $62.20 to $2,353.50 per ounce in the previous session.

**Currency Market**

The U.S. dollar is currently valued at 154.31 yen, up from 153.95 yen at the close of New York trading on Thursday. Against the euro, the dollar stands at $1.0857, compared to $1.0846 the previous day.

**Asia Market Overview**

Asian markets showed signs of stability on Friday, buoyed by strong U.S. GDP data and easing inflation, which suggest the potential for a smooth economic transition for the world's largest economy. Market sentiment has shifted towards expectations of three rate cuts by year-end, with some economists predicting the initial cut by the Fed to be substantial. The anticipated release of the PCE deflator later today is expected to provide more clarity on the rate outlook.

- **China:** The Shanghai Composite Index managed a slight recovery, closing 0.1% higher at 2,890.90 after an early decline. Hong Kong's Hang Seng Index also finished marginally higher at 17,021.31 following volatile trading.

- **Taiwan:** The Taiwan Weighted Index plunged 3.3%, as markets resumed after being closed for two days due to a typhoon.

- **Japan:** Japanese markets ended lower, with the yen stabilizing near a 12-week high against the dollar ahead of the Bank of Japan policy meeting where a 10-basis point rate hike might be considered. The Nikkei 225 Index fell by 0.5% to 37,667.41, while the broader Topix Index dropped 0.4% to 2,699.54. Hino Motors surged 12.8% and Canon rose 6.7% following strong earnings reports.

- **South Korea:** Seoul's stocks bounced back, breaking a two-day losing streak led by financial and shipping firms. The Kospi rose by 0.8% to 2,731.90. Samsung Heavy Industries surged 8.4%, and financial institutions like Hana Financial, KB Financial, and Shinhan Financial saw gains between 4-6%.

- **Australia:** Australian markets recovered, driven by mining, financial, and property sectors. The S&P/ASX 200 Index climbed 0.8% to 7,921.30, and the All Ordinaries Index increased by 0.7%, ending at 8,153.40. Mineral Resources advanced by 3.5% following the announcement of its fiscal year production results, while Pilbara Minerals rose by 3.8%. Conversely, Bellevue Gold saw a significant decline of 21.6% after completing a capital raise.

- **New Zealand:** The benchmark S&P/NZX-50 Index in New Zealand dropped by 0.4%, settling at 12,349.47.

**Europe Market Overview**

European stocks exhibited broad gains on Friday, bolstered by robust U.S. GDP data, which reinforced hopes of a smooth economic transition and spurred expectations for imminent Federal Reserve rate cuts. These developments come after a former Fed hawk suggested that delaying rate cuts until September could unnecessarily heighten recession risks.

- The German DAX Index rose by 0.5%.

- The UK’s FTSE 100 Index and France’s CAC 40 Index both increased by 0.9%.

Notable movements included:

- **ENI:** Significant gains following better-than-expected second-quarter profits.

- **Ams OSRAM:** Sharp increase after reporting a smaller-than-anticipated quarterly net loss.

- **NatWest:** Substantial rise after upping its full-year revenue forecast.

- **Babcock International:** Strong performance reflecting robust full-year results.

- **Hermès International:** Nearly rallied in Paris with a reported 13% increase in second-quarter sales.

- **EssilorLuxottica:** Jump in shares after reporting strong financial results for the first half of 2024.

- **Capgemini:** Decline due to the revised annual revenue forecast, predicting a 0.5% to 1.5% drop.

- **Mercedes-Benz:** Downturn amid a volatile session, following a cut in its 2024 profit outlook for its core car division.

**U.S. Economic Insights**

According to a report from the Commerce Department, U.S. consumer prices edged up as expected in June. The personal consumption expenditures (PCE) price index increased by 0.1% in June, after remaining unchanged in May, aligning with economist predictions. The annual growth rate of the PCE price index slightly decelerated to 2.5% in June from 2.6% in May, also meeting expectations.The Commerce Department recently revealed that the core PCE price index, a measure that excludes volatile food and energy prices, increased by 0.2 percent in June, following a modest 0.1 percent rise in May. This exceeded economists' forecasts, which had anticipated another 0.1 percent increment.

Year-over-year, the core PCE price index maintained its growth rate at 2.6 percent in June, defying expectations that it would decelerate to 2.5 percent. These inflation metrics, reportedly favored by the Federal Reserve, were part of the Commerce Department's detailed analysis of personal income and spending patterns.

According to the report, personal income growth was lower than projected, while personal spending aligned with analysts' predictions.

Additionally, at 10 a.m. ET, the University of Michigan is set to release a revised evaluation of consumer sentiment for July. The consumer sentiment index is anticipated to remain the same as the preliminary figure of 66.0, which marked a decline from June's 68.2.