The Two Engines Driving Markets: Inflation and Technology

Stock Markets Rise on Inflation and Technology

Stock markets are on the rise today, and there are two main reasons for this surge.

Inflation Data and Monetary Policy

Stocks have climbed, with markets from Tokyo to New York hitting record levels, as traders await U.S.
data expected to show a decline in inflation, paving the way for interest rate cuts in September.

The U.S.
Consumer Price Index, a closely watched indicator, is set to be released at 2:30 PM Italian time today.
An anticipated decrease in inflation could fuel optimism about the path of U.S.
monetary policy easing.

Technology Sector Boost

Meanwhile, markets are experiencing a certain level of euphoria, driven by another theme: technology.
What is happening in the markets and what should investors expect?

The tech sector’s enthusiasm continues.
Both the S&P 500 and the Nasdaq 100 gained over 1% yesterday, reaching record levels, driven by companies like Nvidia and Apple.

Apple, the iPhone manufacturer, aims to ship 10% more new devices after a tumultuous 2023.
The demand for its new range is expected to be fueled by Artificial Intelligence services.
In Asia, Taiwan Semiconductor Manufacturing hit record levels after Nvidia and Apple’s most advanced chip supplier reported the fastest sales growth since 2022.

Companies like Sony Group Corp., Tencent Holdings Ltd., and the South Korean chip manufacturer SK Hynix Inc., traded at their highest levels since 2000, have been among the key contributors to the growth of the regional stock index.

This optimistic scenario is further fueled by confidence in the U.S.
inflation decline.
“The main driver is actually the prospect of interest rate cuts,” stated Shane Oliver, Chief Economist and Head of Investment Strategy at AMP in Sydney.
“If we get a good inflation reading, it would tick one of Powell’s boxes”.

Read also: What Did Powell Say About Fed Rate Cuts?

Economists predict that the U.S.
annual Consumer Price Index will slow down to 3.1% in June, from May’s 3.3%.

Meanwhile, Jerome Powell informed lawmakers on Capitol Hill overnight that “more solid data” would strengthen the conviction to cut interest rates.
Future prices imply a 75% chance of a rate cut in September.