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U.S. CPI Preview: How it may affect the S&P 500 and what experts expect

Published 13/12/2022, 09:54 pm
Updated 13/12/2022, 09:54 pm
© Reuters.

By Laura Sánchez -- European markets are tense this Tuesday - IBEX 35, CAC 40, DAX - as investors await the US CPI data for November, which will be released at 08:30 ET (13:30 GMT), and watch for cues on how it may affect the US Federal Reserve's (Fed) interest rate decision on Wednesday.

A further slowdown is expected, with annual CPI expected to increase by 7.3%, down from 7.7% in October.

"We recall that the latest inflation benchmarks have been mixed, with producer prices above expectations but consumer inflation expectations improving forecasts," analysts at Renta 4 said in a note to investors.

"In principle, the slowdown in inflation would largely be a consequence of slower growth in energy prices, while food prices are expected to have continued to rise strongly. Prices of many goods are also expected to decline and services inflation is expected to continue to prove difficult to break. Better-than-expected figures will 'give wings' to the rally that both fixed income and Western equities have been experiencing in recent months, as investors will assume, if they have not already done so, that inflation has peaked in the US," analysts at Link Securities wrote in a note.

"This, and always following this line of argument, will allow the Fed to end its rate hikes process earlier and with a lower terminal rate than expected. On the other hand, if, as happened on Friday with the producer price index (PPI) for the same month, the readings are somewhat worse than expected, sales will return to this market, dragging behind the rest of the Western stock markets," the note added.

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According to a report in FX Street, JPMorgan is optimistic about the S&P 500, as it expects the equity benchmark to rise between 2% and 3% if the year-on-year CPI matches market forecasts of between 7.2% and 7.4%. The U.S. bank anticipates a rebound between 8.0% and 10.0% in the event that the inflation figure reaches 6.9% or less.

FX Street said Goldman Sachs appeared slightly reserved in its forecasts and anticipated S&P 500 gains above 3% if U.S. CPI falls below 7%.

"A reading 7 to 7.3% would see 2 to 3% added to the S&P 500," the report said, adding that "(the US CPI) from 7.4% to 7.7% sees the S&P 500 drop 1 to 2%." It also noted that inflation readings above 7.7% could see S&P 500 losses of more than 3%.

(Translated from Spanish)

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