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U.S. CPI, Rail and Nursing Strikes, Peloton Turmoil - What's Moving Markets

Published 09/13/2022, 06:42 AM
Updated 09/13/2022, 06:47 AM
© Reuters

By Geoffrey Smith

Investing.com -- The U.S. releases consumer inflation data for August, a key input for the Federal Reserve's meeting next week. A rail strike looms larger, while over 15,000 nurses are on strike in Minnesota looking for a 27% pay raise. Oracle's strong earnings keep stocks in buoyant mood in premarket and Barry McCarthy is cleaning house at Peloton. Russia gets a new headache to worry about, while OPEC will publish its latest forecasts for global oil demand in its monthly report. Here's what you need to know in financial markets on Tuesday, September 13.

1. Inflation nation

The big event of the week is upon us. The U.S. will report consumer inflation figures for August at 08:30 ET (12:30 GMT), with all that means for the Federal Reserve’s policy meeting next week.

Analysts expect prices to have fallen on the month – by a meager 0.1% - for the first time since May 2020, owing to the long and steady decline in gasoline prices from their summer peak. They’ve continued their decline since the end of the month and have now fallen for 13 straight weeks.

That should take the annual headline rate down for a second straight month to 8.1%, still painfully high but a full point below its June peak.

However, the sting in the tail will be in the core CPI numbers, which strip out gasoline prices and which will show how broadly inflation pressures have spread through the rest of the economy. Core CPI is expected to have risen 0.3% on the month, no slowdown from July, while the annual headline rate is expected to rise to 6.1%.

2. Playing chicken on the railroad - and in the hospital

Anyone looking for real-world evidence of inflation pressures can find them just as easily in the current state of labor relations.

A national railroad strike still looms as unions and employers continue to indulge in brinkmanship ahead of a Friday deadline, when the mandatory ‘cooling off’ period after the last round of talks expires.

Two of the biggest unions, BLET and SMART TD, are still holding out for an improved offer, while Amtrak has said it will start to limit services from Tuesday, and freight companies have said they will refuse some hazardous cargoes from Friday, unable to guarantee the minimum staffing levels required for safety.

Elsewhere, some 15,000 nurses in Minnesota began a three-day strike on Monday seeking a 27% pay raise spread over three years. It’s believed to be the biggest strike by private-sector healthcare workers in U.S. history.

3. Stocks rise as Oracle beats, Peloton cleans house

U.S. stock markets are extending gains ahead of the big inflation report later, with the market having rallied ahead of the data on confidence that the worst of the surge in prices is over.

By 06:15 ET (10:15 GMT), Dow Jones futures were up 136 points, or 0.4%, while S&P 500 futures and Nasdaq 100 futures were up in line. The three main cash indices had risen as much as 1.3% on Monday.

Supporting the mood is Monday’s late update from Oracle (NYSE:ORCL), which confirmed a pattern of strong business investment. Also in focus later will be Peloton (NASDAQ:PTON), which announced a major overhaul of its leadership after the bell, forcing out chairman and founder John Foley along with the company’s chief legal and commercial officers. CEO Barry McCarthy told a conference on Monday that he had “stopped the bleeding” at the maker of connected fitness bikes.

4. Russia gets a fresh headache on its southern flank

The pressure on the government of Russian President Vladimir Putin increased as Ukraine claimed it had retaken another 500 square kilometers of territory in the south of the country, adding to some 6,000 sq. km of gains around the eastern city of Kharkiv last weekend.

On Monday, some two dozen local lawmakers from St. Petersburg and Moscow had publicly called for Putin’s removal in a rare public show of defiance. Pressure is also mounting from hardline nationalists – as well as veteran Communist Party head Gennady Zyuganov - who support a mass mobilization. That’s something that Putin has studiously avoided so far.

The war’s effect on Europe was on full show earlier as the German ZEW economic sentiment index took another plunge to its lowest level since 2008.

Instability spread further across the former Soviet Union as Azerbaijan – one of the countries with which the EU has sought to break its dependence on Russian gas – launched artillery attacks on neighboring Armenia, which has historically counted on Russian security guarantees.

The renewed fighting further complicates the geopolitical situation as Putin prepares to meet his Chinese counterpart Xi Jinping later this week.

5. Oil up as dollar falls; OPEC report eyed

Crude oil prices rose in line with the broad improvement in risk sentiment (which was also reflected in another decline in the dollar index – now down nearly 3% from its peak last week).

The main events for the market will be the publication of OPEC’s monthly report, due within the next couple of hours, and the release of American Petroleum Institute inventory data for last week at 16:30 ET.

Elsewhere, Reuters reported earlier that production in the Permian basin is set to have reached an all-time high in August, as high crude prices incentivize more drilling.

U.S. crude futures were up 1.1% at $88.77 a barrel, while Brent was up 1.1% at $95.04 a barrel.

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