PPI and retail sales ahead, Arm prices IPO - what's moving markets

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PPI and retail sales ahead, Arm prices IPO - what's moving markets
Credit: © Reuters.

Investing.com -- Investors await the release of fresh economic data on Thursday, as Wall Street considers how a faster-than-anticipated measure of consumer price gains may impact future Federal Reserve policy. Elsewhere, debate swirls around the European Central Bank's own crucial interest rate decision later today, while British semiconductor designer Arm prices its hotly-anticipated initial public offering at the top end of its indicated guidance.

1. Futures rise with producer prices, retail sales ahead

U.S. stock futures pointed up on Thursday as investors looked ahead to new economic data and weighed the implications of a higher-than-expected inflation reading on Federal Reserve monetary policy.

By 05:26 ET (09:26 GMT), the Dow futures contract had gained by 52 points or 0.2%, S&P 500 futures added 12 points or 0.3%, and Nasdaq 100 futures climbed by 64 points or 0.4%.

The main indices on Wall Street were mixed in the prior session, with traders attempting to gauge whether Fed policymakers will pencil in one more interest rate hike this year following the release of the August consumer price index (CPI). The closely-watched measure of inflation in the world's largest economy accelerated to its fastest level in 14 months due to a surge in petrol prices, although the annual increase in underlying price growth was the lowest in almost two years.

According to Investing.com's Fed Rate Monitor Tool , the U.S. central bank is still widely projected to keep borrowing costs at a range of 5.25% to 5.50% at its upcoming meeting later this month. But with indications of stubborn inflationary pressures emerging, markets are projecting a little over a one-in-three chance that Fed officials will opt to raise rates in either November or December.

2. More inflation data looms

The Fed will have a further batch of data to mull over on Thursday, when the U.S. producer price index (PPI) and retail sales figures for August are published at 08:30 ET.

On a monthly basis, the PPI , which aims to measure the prices businesses receive for their goods and services, is seen accelerating from 0.3% to 0.4%, mirroring the jump in consumer prices. Annually , economists expect the rate of increase to pick up slightly to 1.2% from 0.8%.

Retail sales are estimated to have slowed to 0.2% month-on-month from 0.7% in July, in a possible sign that consumers are starting to feel the squeeze from the Fed's unprecedented campaign of interest rate rises.

Elsewhere, the weekly number of Americans seeking unemployment benefits are predicted to have edged up by 9,000 to 225,000. Jobless claims touched their lowest level since February in the week ended on September 2, suggesting a lingering tightness in the U.S. labor market.

Corraling labor demand and, in turn, wage growth has been a central pillar of the Fed's long-standing push to tame inflation.

3. ECB's knife-edge rate decision

The European Central Bank , a major Fed peer, will decide later on Thursday whether to increase interest rates to a record high or keep them steady at already elevated levels.

Despite nine straight rate hikes by the ECB, preliminary readings show that inflation in the 20-country eurozone is now more than twice the Frankfurt-based bank's 2% target.

However, the ECB's monetary tightening, coupled with similar policy moves by central banks across the world and weakness in China, have begun to hit the broader eurozone economy. Manufacturing is suffering, while lending has slumped and services have showed early signs of strain, contributing to concerns that the region may slip into a recession.

How ECB officials approach their rate decision has been a cause for intense debate. The economic fears have had many observers predicting that policymakers may skip a rate rise this month, although the case for another hike was boosted after Reuters reported that the ECB will lift its inflation forecast for next year to above 3%.

4. Arm's top-end IPO pricing

Shares in Arm will begin trading in New York later today after the British chip designer priced its initial public offering at $51 apiece, touching the top end of its indicated range and securing a fully diluted valuation of $54.5 billion.

The listing -- the largest since electric-truck maker Rivian's (NASDAQ: RIVN ) roughly $12B debut in 2021 -- was fueled by strong demand that saw the stock heavily oversubscribed. Many of Arm's biggest clients, including Apple (NASDAQ: AAPL ), Nvidia (NASDAQ: NVDA ) and Google-parent Alphabet (NASDAQ: GOOGL ), have already signed up to be cornerstone investors.

The IPO's value is lower than the $64B Arm-owner SoftBank (TYO: 9984 ) spent last month to acquire the 25% stake in the business it did not already own. However, it is still more than SoftBank's $40B sale of Arm to Nvidia that was scuttled in 2022 following regulatory opposition.

Arm's flotation will likely serve as a bellwether for the recently dormant IPO market, which has fallen relatively silent due to economic uncertainty and elevated interest rates.

5. Oil prices hover around 10-month highs

Oil prices rose on Thursday, with traders eyeing predictions for tight supplies over the rest of 2023 and anticipating a solid demand outlook despite an uptick in U.S. crude stockpiles.

The International Energy Agency largely stuck by its estimates for demand growth this year and next in its monthly report on Wednesday, joining the Organization of Petroleum Exporting Countries in expecting oil markets to tighten further this year.

Bolstered by Saudi Arabia and Russia recently extending their oil output cuts, both oil benchmarks hit 10-month highs in the prior session. Markets also largely looked past a 4 million-barrel jump in U.S. crude inventories last week, confounding analysts' expectations for a drop of around 2 million barrels.

By 05:27 ET, the U.S. crude futures traded 0.5% higher at $88.97 a barrel, while the Brent contract climbed 0.5% to $92.38.

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