CPI inflation has been one that hasn't always been steady enough to keep the Fed happy

Good Morning Folks!

Asian markets saw a fairly solid trading session overnight despite losses across the board in Europe and the US on Monday’s trading session. However there is amble opportunity for markets to turn around the poor start to the week as Tuesday is flush with economic and corporate data for traders to get stuck into. We have also seen some developments in the geopolitical situations that have been keeping markets wary, as yesterday saw pro-Russian rebels finally let the bodies of the dead be taken away from the crash site of Malaysian airlines flight MH17, and they also handed over the black box flight recorders to authorities. These are two key break troughs for the international community, who have been heaping the pressure on Vladimir Putin to act to install an immediate ceasefire while investigators carry out their job at the crash site.

There is a fair amount of data for traders to get their teeth into away from the geo political situations today as both the economic and corporate calendar are full with data. The major talking points will come later this afternoon out of the US as CPI inflation figures are released as well as existing home sales readings. While economic data out of the US is always an important event for the markets, it is likely to take on a little more significance in the coming months after Janet Yellen’s comments from last week. The Fed chief told members of congress that monetary policy would remain the same unless the data showed significant signs of improvement, in what was one of her more hawkish appearances since she took over the role as head of the US central bank. The thing that makes this more important is that economic data out of the US has been flying, with unemployment, GDP, PMI’s and retail sales numbers are showing significant signs that the economy could support a higher interest rate. Today’s figures however had been some of the more worrying releases of late. CPI inflation has been one that hasn’t always been steady enough to keep the Fed happy. Recently the number has moved back towards the 2% Fed target and if we get a number as expected at 2.1% today then this will be an extremely positive result for the economy, and could give Janet Yellen more ammunition to push those interest rates higher sooner than people expect. As well as the CPI we are looking at existing home sales. This number is expected to fall from 4.9% in May to 2% in June. The data in the US does not stop there as after the closing bell Apple release there Q3 earnings.

With not much data out of Europe or the UK this morning it may well be corporate earnings that take centre stage today. In the UK we will still be trying to take in the terrible results from supermarket giant Tesco yesterday morning, but will also have the likes of ARM Holdings and Beazley to keep an eye on before we get the public sector net borrowing numbers at 0930. Overall markets will have enough to keep them interested and hopefully away from the worries of the geopolitical tensions between Russia and Western Europe and Gaza and Israel. However any large developments always have the potential to spook markets into a move, no matter how busy elsewhere.

Ahead of the open we expect to see the FTSE open higher by 25 points and the German DAX higher by 29 points.