European Investors Cautious Ahead of Inflation Report

European stock markets are trading cautiously as investors are unwilling to take on additional risk ahead of the release of new inflation data after two days of significant stock price increases.

The STOXX 600 index of leading European stocks was up 0.1 percent at 9:30 AM, after strengthening by 1 percent over the past two days.

This morning, the London FTSE index rose 0.46 percent to 7,499 points, while the Paris CAC increased by 0.11 percent to 7,380 points. The Frankfurt DAX, on the other hand, weakened by 0.02 percent to 15,928 points.

After two days of significant growth, investors are reluctant to take on additional risk ahead of the inflation reports for August in Germany and Spain, as well as the consumer confidence report in the eurozone.

Meanwhile, Asian stock prices rose this morning. The MSCI index for the Asia-Pacific region, excluding Japan, was up 0.5 percent around 9:30 AM, marking the third consecutive day of gains.

On the Tokyo Stock Exchange, the Nikkei index strengthened by 0.3 percent, while stock prices in Shanghai, South Korea, and Australia rose between 0.1 and 1.2 percent. In Hong Kong, however, prices slightly fell.

As there are no significant news from the region this morning, Asian markets are following yesterday’s rise on Wall Street, where the Dow Jones increased by 0.85 percent, while the S&P 500 rose by 1.45 percent, and the Nasdaq index by 1.74 percent.

Surge in Tech Stocks

The rise in these indices is primarily attributed to the surge in stock prices of several large-cap technology giants.

Tesla’s stock price jumped more than 7.5 percent, Nvidia’s by more than 4 percent, and Alphabet’s by nearly 3 percent.

In most other sectors, stock prices also rose, thanks to new data showing that the U.S. labor market is ‘cooling’, which has supported investors’ hopes that the Fed will not further increase key interest rates.

However, recently, Fed Chairman Jerome Powell stated that inflation remains too high and that the central bank is prepared for further rate hikes, but investors hope that inflation will ease enough in the coming months for the Fed to halt the cycle of raising interest rates.

In the money market, there is nearly a 90 percent chance that the Fed will keep rates unchanged at its September meeting.

Additionally, there is more than a 50 percent chance that the Fed will not change rates until November.

As a result, yields on U.S. government bonds fell further yesterday, which is favorable for the stock market.

– It seems that more and more investors believe that the cycle of rate hikes is behind us, so they are starting to buy stocks – says Sam Stovall, strategist at CFRA Research.