US pre-open: Futures trade slightly higher ahead of CPI data

Wall Street futures were in the green ahead of the bell on Wednesday ahead of last month's all-important CPI reading.

As of 1220 BST, Dow Jones futures were up 0.17%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.22% and 0.35% firmer, respectively.

The Dow closed 192.51 points lower on Tuesday as global economic growth concerns remained in focus ahead of a potentially rough earnings season.

Wednesday's primary focus will be June inflation data at 1330 BST, with economists expecting to see CPI climb by 8.8% year-on-year basis to beat May's 8.6% reading, which was the biggest increase in more than 40 years.

Market participants believe a hot CPI reading may lead the Federal Bank to hike interest rates by another 75 basis points at this month’s meeting - just a month after the central bank raised benchmark interest rates by three-quarters of a percentage point in its most aggressive rate hike since 1994.

AvaTrade's Naeem Aslam said: "All eyes will be on one data point and one data only, and that is the US CPI number which will be released at 12:30 GMT today. It is highly likely that the report will show consumer inflation sped up to 8.8% year on year, which will be the fastest clip since 1981 or in nearly 41 years. Although, the core inflation reading may decelerate to 5.7%.

"The most important aspect of this data will be how the Fed will perceive this reading and, secondly, how market players will translate this number. As for the Fed, it is highly possible that the Fed will stay on track with its aggressive monetary policy and that a strong number will only increase the odds of a rate hike of 75 basis points. Market players could see higher inflation as another threat, and we could see the risk-off sentiment flaring further. This is because strong inflation reading would mean a higher interest rate, and traders and investors love loose monetary policy."

Also drawing an amount of investor attention was news that the International Monetary Fund has cut its GDP forecast for the US to 2.% from its previous level of 2.9%. The IMF also reduced 2023's growth estimate to 1% from its initial reading of 1.7% and predicted that the US unemployment rate could increase to as high as 4.6% next year.

Elsewhere on the macro front, US mortgage applications fell 1.7% in the week ended 8 July, according to the Mortgage Bankers Association, led by a 3.6% decline in the purchase index. Applications to refinance a home rose 2.2% as the average interest rate on the benchmark 30-year fixed-rate mortgage was unchanged at 5.74%

Still to come, the Fed's beige book and last month's budget statement will be published at 1900 BST.

In the corporate space, Delta Air Lines posted a quarterly profit as price increases helped cover heightened operating costs throughout the period as a result of Russia's invasion of neighbouring Ukraine.

Reporting by Iain Gilbert at Sharecast.com