Wall Street Calm Ahead of Inflation Data

Wall Street is trading calmly on Monday as investors await the monthly US consumer inflation report. Chinese inflation indicates slowing consumer spending, while the European Central Bank holds its latest policy meeting this week.

1. US CPI to Confirm December Rate Cut?

The US Federal Reserve is expected to cut interest rates next week due to a weakened labor market, despite job growth rebounding after strikes and hurricanes.

Financial markets see over an 80% chance of a 25 basis points rate cut at the Fed’s Dec. 17-18 meeting. The November consumer price inflation report, due Wednesday, could change expectations, especially with signs of rising inflation.

The core PCE index rose to 2.8% in October, compounded by inflationary worries from President-elect Trump's plan to raise tariffs. Trump has stated he will not seek to remove Fed Chair Jerome Powell from his position.

2. Futures Muted at Start of Week

US stock futures began the week quietly as investors anticipate key inflation data. As of 03:55 ET (08:55 GMT), Dow futures were down 55 points (0.1%), S&P 500 futures climbed 2 points (0.1%), and Nasdaq futures rose by 40 points (0.2%).

The S&P 500 and Nasdaq Composite recently hit record highs, while the Dow underperformed. With limited economic data on Monday, attention is focused on Wednesday's inflation report.

3. ECB Leads This Week’s Central Bank Parade

The European Central Bank's meeting on Thursday is also expected to result in a rate cut, with economists predicting another 25-bps reduction, the fourth cut this year. While Eurozone inflation ticked higher in November, it remains below the ECB’s 2% target.

The ECB is poised to revise lower its growth and inflation forecasts after political turmoil in France and Germany. Speculation arises that the Bank of Canada and Swiss National Bank may also announce larger rate cuts this week.

4. Chinese Inflation Drop Shows Economic Weakness

Chinese consumer inflation fell more than expected in November to a five-month low, indicating a fragile consumer spending environment. November CPI decreased 0.6% month-on-month, worse than the expected 0.4% decline.

CPI year-on-year growth was only 0.2%, below forecasts of 0.5%. In response, Chinese leaders promised more proactive fiscal measures and looser monetary policy to boost domestic consumption. Fitch Ratings revised down its growth forecasts for China's GDP in 2025 and 2026.

5. Oil Rises on Syrian Uncertainty

Crude prices increased as uncertainty in Syria could affect the oil-rich Middle East. US crude futures rose 1.3% to $68.08 a barrel, while Brent gained 1.1% to $71.90.

Syrian rebels claimed to have ousted President al-Assad, but weak Chinese inflation figures raised concerns about demand. Additionally, Saudi Aramco has lowered January 2025 prices for Asian buyers, signaling decreased demand.