Inflation data looms large, gold surges, LVMH to report - what's moving markets

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Inflation data looms large, gold surges, LVMH to report - what's moving markets
Credit: © Reuters.

By Scott Kanowsky

Investing.com -- As markets count down to the much anticipated release of March inflation data, investors eye the Federal Reserve's future interest rate path, while gold gains and oil prices oscillate. Elsewhere, the world's biggest luxury group LVMH prepares to release its first quarter sales.

1. Futures steady as inflation data approaches

U.S. futures were stable on Wednesday, as investors braced themselves for the publication of the key inflation figures.

At 04:42 ET (08:42 GMT), the Dow futures contract had gained 59 points or 0.17%, S&P 500 futures inched up 5 points or 0.13%, and Nasdaq 100 futures futures added 8 points or 0.07%.

Trading on Tuesday was muted, in a sign that traders were choosing to stay on the sidelines ahead of the publication of the latest U.S. consumer price index later today and the producer price index tomorrow. The S&P 500 ended mostly flat, while the tech-focused Nasdaq slipped by 0.4%.

In a note to clients, CMC (NS: CMC ) Markets chief markets analyst Michael Hewson noted that markets seemed to be in a "twilight zone" between last week's U.S. nonfarm payroll report and the CPI numbers.

2. Inflation and the Fed's interest rate path

The inflation data is widely expected to provide some clues about the future path of the Federal Reserve's recently aggressive monetary policy tightening campaign aimed at curbing soaring prices.

On a year-on-year basis, the consumer price index from the Bureau of Labor Statistics is projected to have slowed last month to 5.1% from 6.0% in February. The spotlight will also shine on core prices , a major data point for Fed officials that strips out volatile items like food and energy for Fed officials. That figure is seen moving up to 5.6% from 5.5% in the prior month.

The numbers could well factor into when - or if - the Fed chooses to ease away from its rate-hiking cycle.

More hints on this front will potentially be provided today when the U.S. central bank unveils the minutes from its latest meeting. Investors will be keen to find out just how much policymakers considered a pause in borrowing cost rises following the recent turmoil in the financial services sector sparked by the failure of Silicon Valley Bank and Signature Bank.

3. Gold tops $2K

Gold prices pushed past the key level of $2,000 on Wednesday, as investors searched for a safe haven after Minneapolis Federal Reserve President Neel Kashkari warned of a possible recession in the U.S. this year.

By 04:42 ET, spot gold jumped 0.35% to $2,010.71 an ounce, while gold futures increased by 0.33% to $2,025.75 an ounce, bringing both instruments closer to a record high reached in 2020.

Kashkari flagged that the higher interest rates and a decrease in lending following the banking sector ructions may spark a recession in 2023. But he said that it would likely be worse to allow inflation to remain elevated.

The prospect of a downturn in the world's largest economy has helped boost demand for gold, an asset widely regarded as a safe haven in times of financial uncertainty.

The precious metal has been on a tear since March, as concerns over banks spurred expectations that the Fed has limited room to keep lifting rates. A pause in the Fed's rate hike cycle bodes well for gold and other non-yielding assets, given that it entails a lower opportunity cost for holding such assets.

4. Oil prices choppy ahead of inflation and inventory data

Meanwhile, oil prices hovered mostly around the flatline, with traders awaiting the inflation figures as well as U.S. government crude inventories.

By 04:42 ET, U.S. crude futures were unchanged at $81.53 a barrel, while the Brent contract edged up by 0.05% to $85.65 per barrel.

The U.S. government will publish its latest crude stockpile data later on in the session. The market will also have a chance to parse through monthly reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency on Thursday and Friday respectively.

Weakness in dollar helped push up crude benchmarks by around 2% on Tuesday, even as the American Petroleum Institute - an industry body - reported a surprise increase in crude stockpiles last week.

5. LVMH to post Q1 sales

In corporate news, (EPA: LVMH ) will report its first quarter revenues today, as the luxury giant behind brands like Louis Vuitton and Dior looks to build on record sales and profits last year.

The results may give some indication about the state of demand in China. The country, which is a crucial market for the high-end products sold by LVMH, was hit by a wave of COVID-19 cases in the prior quarter following a sudden decision to lift pandemic-era health restrictions.

Bloomberg consensus estimates have called for an 8.97% increase in organic revenue, with sales of its fashion and leather goods jumping by almost a tenth to €10.02 billion.

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