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U.S. CPI Aftermath, Disney, PPI, Jobless Claims and IEA - What's Moving Markets

Published 08/11/2022, 05:39 AM
Updated 08/11/2022, 05:41 AM
© Reuters

By Peter Nurse

Investing.com -- U.S. stocks are set to open higher in the wake of the weaker-than-expected consumer inflation report, with Disney’s subscriber increase helping. New producer prices and jobless claims data are scheduled for release, while IEA data points to a tightening supply situation in the crude market. Here's what you need to know in financial markets on Thursday, August 11.

1. Inflation optimism overdone?

Risk sentiment has been on the rise Thursday, boosted by Wednesday’s cooler-than-expected consumer inflation reading, which investors have interpreted as easing the pressure on the U.S. Federal Reserve to aggressively tighten monetary policy.

Investors are now pricing in a 50 basis point hike by the Fed in September, down from earlier expectations of a 75 basis point hike.

However, they could well be jumping the gun.

Fed policymakers were quick to speak after the release, attempting to dilute this optimism.

The Fed is "far, far away from declaring victory" on inflation, said Minneapolis Federal Reserve Bank President Neel Kashkari, San Francisco Federal Reserve Bank President Mary Daly also warned it is far too early to "declare victory," while Chicago Fed President Charles Evans stated inflation was still "unacceptably" high.

After all, while inflation was flat in July, month on month, after advancing 1.3% in June, it was still up 8.5% compared to a year ago. And that’s still unacceptable.

2. Disney takes lead in streaming game

Walt Disney (NYSE:DIS) has taken the lead in the global streaming competition, edging past Netflix (NASDAQ:NFLX) with a total of 221 million streaming customers as part of its third quarter results, announced after the close Wednesday.

Disney started building a streaming service to rival Netflix in 2017, recognizing that audiences were moving to online viewing from traditional cable and broadcast television.

The entertainment giant said that total Disney+ subscriptions rose to 152.1 million during the quarter. Combined with Hulu’s 46.2 million subscribers and the 22.8 million with ESPN+, this total of over 221 million surpasses long-time leader Netflix’s 220 million subscribers.

This popularity has given Disney the license to plan price increases for customers who want to watch Disney+ or Hulu without commercials, even with the public struggling with soaring inflation.

That said, the company also lowered its long-term subscriber forecast for Disney+ customers on Wednesday to between 215 million and 245 million by the end of September 2024, blaming the loss of cricket rights in India. That is down from the 230 million to 260 million which Disney had been forecasting.

3. Stocks set to edge higher; Disney soars

U.S. stock markets are set to open marginally higher Thursday, continuing the previous session’s sharp gains on the back of the weaker-than-expected inflation report.

By 06:00 ET (10:00 GMT), Dow Jones futures were up 105 points, or 0.3%, S&P 500 futures were up 0.3%, and Nasdaq 100 futures were up 0.2%.

The main Wall Street indices all closed with strong gains Wednesday, with the blue-chip Dow Jones Industrial Average rising over 500 points or 1.6%, the broad-based S&P 500 gaining 2.1%, and the tech-heavy Nasdaq Composite soaring 2.9%, closing at its highest level since late April.

Helping the tone Thursday were strong results after the close Wednesday from Disney [see above], with the entertainment giant’s stock seen over 7% higher premarket.

The earnings season continues Thursday, with reports from the likes of Rivian Automotive (NASDAQ:RIVN), Warby Parker (NYSE:WRBY), and Poshmark (NASDAQ:POSH) scheduled.

Other companies in the spotlight include Sonos (NASDAQ:SONO) and Bumble (NASDAQ:BMBL), with both stocks sharply lower premarket after slashing their full-year guidance.

4. PPI, Initial Jobless Claims data due

Following the excitement of Wednesday’s CPI release [see above], investors will be looking to the release of the U.S. producer price index for July for confirmation of a lessening of inflationary pressures.

Producer prices increased more than expected in June, climbing 1.1% on the month, but are expected to have only climbed 0.2% in July as the extraordinary energy price rises stabilized. This still represents an annual rise of 10.4%, down from 11.3% the previous month.

The PPI number is due at 08:30 ET (12:30 GMT), the same time as the release of the weekly initial jobless claims number.

The number of Americans filing new claims for unemployment benefits increased last week by 6,000 to 260,000, suggesting some softening in the labor market.

This softening is expected to continue, with the number of new jobless claims seen increasing to 263,000.

5. Oil rises; IEA points to falling Russia output

Crude oil prices rose Thursday, boosted by renewed concerns about supply tightness following the publication of a report by the International Energy Agency.

Russia’s oil output is set to fall roughly 20% by the start of next year as a European Union import ban comes into force, according to a market report from the Paris-based intergovernmental organization, with close to 2 million barrels a day shut in by the start of 2023.

Oil is struggling to find direction as the market has yet to reach a consensus on the outlook for supply and demand.

The market slipped back earlier Thursday on the resumption of flows through a key European pipeline, from Russia along the southern Druzhba network, as a payment dispute was resolved.

U.S. crude inventories rose by 5.5 million barrels last week, according to data from the Energy Information Administration, released Wednesday. This is the second straight week of an unexpectedly large rise in U.S. oil stocks, suggesting weakening demand at the world’s largest consumer.

By 06:00 ET, U.S. crude futures were up 1.2% at $93.00 a barrel, while Brent crude was up 1% at $98.39 a barrel.

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