Markets Week Ahead: US Indices, Gold Recover Losses After US Inflation Fears

by Nick Cawley, Senior Strategist

Markets Week Ahead: US Indices, Gold Recover Losses After US Inflation Fears

Inflation in the US remains sticky at both producer and consumer level but US indices are seemingly ignoring these price pressures and remain near recent multi-year highs.

US inflation releases this week helped push US Treasury yields, and the greenback, higher this week as financial markets continue to re-price US rate cut expectations. Both US CPI and PPI data came in above forecast, pushing the US dollar higher, while US indices took a hit early in the week. The moves were mostly reversed later in the week to leave most markets little changed at the close on Friday.

The mid-week volatility can be clearly seen in the daily VIX chart with a sharp post-US CPI rally on Tuesday. Again this move was reversed during the rest of the week.

VIX DAILY CHART

While US indices remain at, or near to, recent multi-year highs, one index that has underperformed global rivals, the FTSE 100, had a very strong week on the back of supportive UK economic data. The UK 100 also benefitted from the slightly stronger US dollar with around 70% of company earnings made overseas.

FTSE 100 DAILY CHART

Gold also trimmed losses this week, helped in part by the precious metal being heavily oversold, according to one technical indicator.