US CPI Due at 12:30 UTC as Wall Street Closes Flat and Asian Markets Hold Steady

Markets enter Wednesday's London morning in a holding pattern ahead of the most closely watched US data release of the week: September consumer price figures due at 12:30 UTC, with annual inflation expected to accelerate to 3.6% from 3.4% in August and core CPI on a year-on-year basis seen rising to 2.5% from 2.4%.

What happened

Wall Street closed Tuesday's session with minimal movement. The S&P 500 ended at 7,805.45, little changed from its previous close of 7,807.24, while the NASDAQ 100 fell 0.31% to 30,569.48, from 30,664.70 the session before. The modest divergence between the two indexes reflected some pressure on technology-heavy names without a broader market sell-off.

Overnight in Asia, the Nikkei 225 was flat at 67,744.29, barely moving from its previous close of 67,777.52. The index held in a narrow range, reflecting the cautious tone ahead of the US inflation print. In the foreign exchange market, EUR/USD stands at 1.1207 in early London trade, little changed from its previous close of 1.1203.

Why it matters

The September US CPI release carries significant weight for global markets. Consensus estimates point to a monthly headline increase of 0.6%, up from 0.4% in August, and a seasonally adjusted CPI level of 335.8, against a prior reading of 334.13. The unadjusted inflation rate index is expected at 336.65, compared with 334.98 in August.

Core inflation on a monthly basis is forecast to ease to 0.2% from 0.3% in August, which would be a moderating signal even as the annual core rate is seen ticking higher to 2.5% from 2.4%. The combination of a rising headline annual rate and a potentially softer monthly core reading makes the print difficult to interpret in advance. Any deviation from the 3.6% annual headline estimate or the 2.5% core year-on-year estimate carries direct implications for rate expectations and, in turn, for bond and equity markets globally.

European markets will trade through the morning with this release on the horizon. The Italian Stock Exchange opens at 09:00 Rome time and will run its full session until 17:30 before the data arrives at 12:30 UTC, meaning European equity participants will be active when the figures hit. EUR/USD, standing at 1.1207, is sensitive to any surprise in the figures given the implications for the interest rate differential between the US and the eurozone.

What to watch next

The US CPI figures for September are released at 12:30 UTC. The key metrics to track are the annual headline rate against the 3.6% estimate, the annual core rate against the 2.5% estimate, and the monthly headline figure against the 0.6% forecast. The monthly core reading, expected at 0.2% against a prior 0.3%, will also draw attention as a signal of whether underlying price pressures are easing on a short-term basis.

The seasonally adjusted CPI index level, forecast at 335.8 from 334.13, and the unadjusted index, seen at 336.65 from 334.98, provide additional reference points for gauging the breadth of price changes across the basket. Together, the six CPI metrics due at 12:30 UTC will set the tone for the remainder of the European trading day and for the New York open that follows.