FX.co ★ Looming Inflation Data May Lead To Choppy Early Trading On Wall Street

U.S. index futures are indicating a relatively stable start on Wednesday, suggesting that stocks may struggle for direction following a generally upward trend in the previous session. Investors appear cautious about making decisive moves in anticipation of the Federal Reserve’s favored measure of consumer price inflation, expected shortly after the market opens.

The personal consumption expenditures (PCE) price index is projected to see a 0.2% increase for the second consecutive month, with the annual growth rate anticipated to climb from 2.1% in September to 2.3% in October. The core PCE price index, excluding food and energy costs, is likewise expected to rise by 0.3% for another consecutive month, with the yearly growth rate estimated to inch up from 2.7% in September to 2.8% in October.

These inflation statistics could influence interest rate expectations ahead of the Federal Reserve's mid-December monetary policy meeting. As it stands, according to the CME Group's FedWatch Tool, there is a 66.5% probability that the Fed will further cut rates by 25 basis points next month, and a 33.5% chance of maintaining the current rates.

Economic data released before trading commenced had minimal impact on futures. This includes a Labour Department report showing an unexpected dip in initial jobless claims for the week ending November 23rd. Meanwhile, the Commerce Department noted a smaller-than-anticipated increase in durable goods orders for October.

In the previous trading day, following an early mixed performance, major U.S. stock indexes gained ground. The Dow Jones Industrial Average shook off initial weaknesses, closing at yet another record high, despite dropping by up to 0.7% in early trading. It ended the day up 123.74 points, or 0.3%, at 44,860.31. Similarly, the S&P 500 increased by 34.26 points, or 0.6%, achieving a record close of 6,021.63, and the Nasdaq rose by 119.46 points, or 0.6%, to 19,174.30.

Traders largely disregarded President-elect Donald Trump’s latest threats of imposing heightened tariffs on Mexico, Canada, and China. Via Truth Social, his social media platform, Trump declared his intention to levy a 25% tariff on all products from Mexico and Canada, citing the increase of illegal immigrants and drugs, particularly Fentanyl, into the U.S. as the reason. Additionally, Trump indicated a further 10% tariff on Chinese imports, criticizing the country’s insufficient response to halting drug trafficking.

However, with Trump's recent nomination of Scott Bessent as Treasury Secretary, there’s some market optimism that the tariff threats may not materialize as feared. Bessent has previously advocated for a gradual implementation of any tariff increases.

Stocks registered more gains following the release of Federal Reserve meeting minutes, where officials expressed that it would be appropriate to gradually lower interest rates. The decision remains data-dependent, aiming for inflation to sustainably decline to 2% while maintaining employment levels near their maximum.

Prominent among the day's advancements were software stocks, with the Dow Jones U.S. Software Index climbing 1.4% to a new record high. Utilities and pharmaceutical stocks also experienced notable strength, as evidenced by the 1.3% increase in the Dow Jones Utility Average and a 1.2% rise in the NYSE Arca Pharmaceutical Index.

Conversely, housing stocks suffered considerable declines, dragging the Philadelphia Housing Sector Index down by 1.8%. This downturn followed the Commerce Department's report of a significant decrease in new home sales for October. Additional weakness was seen in oil services, airline, and computer hardware stocks, somewhat balancing the gains in other sectors.

### Commodity, Currency MarketsCrude oil futures have experienced an uptick, advancing by $0.31 to reach $69.08 per barrel, after a previous decline of $0.17 that saw prices at $68.77 per barrel on Tuesday. Concurrently, gold prices are on the rise, with an ounce trading at $2,676.30, marking a $30 increase since the last session's close at $2,646.30. Gold saw a modest gain of $3.70 on Tuesday.

In the currency markets, the U.S. dollar is currently valued at 151.35 yen, a decrease from the 153.08 yen it commanded when New York markets closed on Tuesday. Against the euro, the dollar is trading at $1.0549, up from $1.0489 the previous day.

**Asia**

Asian stocks displayed varied outcomes on Wednesday. This comes as official reports indicate that Chinese industrial profits continued to decline in October, though at a less severe pace compared to September. Regional stock gains were capped by concerns over potential tariffs amidst U.S. President-elect Donald Trump's appointment of Jamieson Greer, a known critic of China, as the United States Trade Representative (USTR), and Kevin A. Hassett as director of the White House National Economic Council. Both are pivotal to the new administration's economic strategies. During Trump's first term, Greer was instrumental in enforcing tariffs on China to address unfair trade practices, while Hassett significantly contributed to the formation and passage of the 2017 Tax Cuts and Jobs Act.

In Asia, the dollar remained subdued as traders awaited the release of the U.S. October Core Personal Consumption Expenditures Price Index.

Oil and gold prices saw increases as investors evaluated the ramifications of a potential ceasefire agreement between Israel and Hezbollah.

China's Shanghai Composite Index enjoyed a 1.5 percent rally, closing at 3,309.78, driven by data showing a reduced decline in industrial profits which fell by 10 percent year-on-year in October, compared to a sharper 27.1 percent reduction in September.

Hong Kong's Hang Seng Index jumped by 2.3 percent, rebounding to 19,603.13 from a two-month low. However, Japanese markets declined due to a stronger yen impacting automotive stocks such as Honda Motor, Toyota, and Nissan, which collectively fell between 3 and 5 percent. Concerns over Trump's tariff promises also weighed heavily on traders' minds. The Nikkei 225 Index decreased by 0.8 percent to 38,134.97, while the more comprehensive Topix Index dropped 0.9 percent to 2,665.34.

In Seoul, the stock market concluded with losses, with the Kospi falling 0.7 percent to 2,503.06. The technology sector faced downward pressure as Samsung Electronics plunged 3.4 percent and SK Hynix declined by 5 percent due to uncertainties surrounding the U.S. CHIPS Act.

Australia's market saw gains spurred by data showing that consumer price inflation remained at a three-year low in October. This development encouraged predictions of a potential 25 basis point interest rate cut by May 2025. The S&P/ASX 200 Index rose by 0.6 percent to 8,406.70, paralleled by the All Ordinaries Index, which also increased by 0.6 percent to 8,659.60. Notably, Web Travel Group's shares surged by 13.5 percent following the release of its half-year results. In the financial sector, both Commonwealth Bank of Australia and QBE Insurance saw rises exceeding 2 percent.

Across the Tasman, New Zealand's S&P/NZX-50 Index advanced by 0.8 percent to 13,212.92. The upward movement was catalyzed by the country's central bank cutting interest rates by 50 basis points, marking the third consecutive reduction to support the struggling economy.

**Europe**

European equities mostly traded lower on Wednesday as investor sentiment was dampened by fears of inflationary pressures stemming from U.S. President-elect Donald Trump's anticipated tariff policies. There is concern that Trump's proposed economic moves, particularly tax reductions and tariffs, might significantly impact Federal Reserve's plans for lowering interest rates.

Investor anxiety was further fueled by the increasing risk premium on French debt, which surged to its highest level since 2012 amid fiscal and political uncertainties.

The French CAC 40 Index saw a decline of 0.9 percent, with the German DAX Index falling by 0.3 percent, and the U.K.'s FTSE 100 Index slightly down by 0.1 percent.

Shares of Just Eat Takeaway.com NV dropped following the company's announcement to delist from the London Stock Exchange by December 27, citing low trading volumes and high expenses, while maintaining its primary listing on Euronext Amsterdam.

Grifols witnessed a sharp drop in its share value after reports emerged of Canadian fund Brookfield abandoning its acquisition plans of the Spanish pharmaceutical company.

Johnson Matthey, a British company specializing in chemicals and technology, faced a downturn in shares after reporting decreased sales and profits for the half-year ending in September.

Conversely, EasyJet shares soared as the airline reported a surge in annual profits following another record-breaking summer season.Aroundtown SA, a prominent real estate firm based in Luxembourg, experienced a significant rise following the release of robust operational results for the initial nine months of 2024. Similarly, the Swiss biotechnology company Idorsia saw its stock value increase sharply after announcing a debt restructuring plan that includes the elimination of up to 270 positions.

In a relatively quiet day in terms of economic updates, recent data revealed that French consumers have grown increasingly pessimistic regarding the country's future economic prospects. According to the latest figures from INSEE, the French statistical bureau, consumer confidence took a further hit in November, reaching its lowest point in five months. The consumer sentiment index fell to 90 from 93 in October, remaining significantly below the long-term average benchmark of 100.

### U.S. Economic Developments

A Labor Department report disclosed an unexpected decline in the number of Americans submitting first-time claims for unemployment benefits for the week ending November 23rd. Specifically, initial jobless claims dropped to 213,000, marking a 2,000 decrease from the previous week's adjusted figure of 215,000. Analysts had anticipated an increase to 217,000.

Furthermore, the report highlighted that the four-week moving average, which is less prone to volatility, also fell to 217,000, a reduction of 1,250 from the prior week's revised average of 218,250.

The Commerce Department also announced that new orders for U.S. manufactured durable goods in October grew less than anticipated. Durable goods orders inched up by 0.2 percent in October, following a revised 0.4 percent decline in September, contrary to economists' predictions of a 0.5 percent increase.

Excluding transportation equipment, durable goods orders saw a marginal increase of 0.1 percent in October, after a 0.4 percent advance in September. Forecasts had indicated a potential 0.2 percent rise.

Additionally, another Commerce Department report from Wednesday confirmed that the growth rate of U.S. economic activity in the third quarter remained unchanged from prior estimates. The GDP climbed by 2.8 percent, consistent with the preliminary "advance" estimate issued previously. Though upward revisions were noted in private inventory and nonresidential fixed investments, these were counterbalanced by downgrades in exports and consumer expenditures. This 2.8 percent growth represents a slight deceleration from the 3.0 percent expansion recorded in the second quarter.

At 9:45 a.m. ET, the release of the MNI Indicators report on Chicago-area business activity for November is anticipated. The Chicago business barometer is expected to rise to 44.7, up from October’s 41.6, though it would still signify a contraction if it remains beneath the 50 mark.

The Commerce Department's report on October personal income and spending is set for release at 10 a.m. ET, with both metrics projected to rise by 0.3 percent. The personal consumption expenditures (PCE) price index is expected to register a second consecutive 0.2 percent uptick, with the annual growth rate increasing to 2.3 percent from September's 2.1 percent. Excluding food and energy, the core PCE price index is forecasted to rise by 0.3 percent for the second month, with the annual rate anticipated to creep up to 2.8 percent from 2.7 percent in September.

Additionally, the National Association of Realtors is poised to issue its October report on pending home sales at 10 a.m. ET, projecting a 1.3 percent decline following a 7.4 percent surge in September.

The Energy Information Administration is scheduled to release its findings on oil inventories for the week concluding November 22nd at 10:30 a.m. ET, with expectations of a 1.3 million barrel decrease following a 0.5 million barrel increase the previous week.

At 1 p.m. ET, the Treasury Department will disclose the results of its $44 billion seven-year note auction.

### Stock Market Focus

Dell Technologies (DELL) shares are trending downwards in pre-market trading despite the PC manufacturer posting third-quarter earnings that exceeded forecasts, due to underwhelming guidance for the fourth quarter. Meanwhile, Workday (WDAY), a human resources software company, may experience pressure despite surpassing third-quarter expectations, as its subscription revenue guidance for the fourth quarter wasn’t as strong as anticipated by analysts.

Conversely, Urban Outfitters (URBN) shares are likely to open strong, propelled by their fiscal third-quarter performance, which outstripped expectations in both sales and earnings.