US stock futures slipped on Wednesday as investors braced for the August consumer inflation report that could help determine the scale of an expected interest rate cut from the Federal Reserve next week. Markets are currently assigning a 66% chance of a 25 basis point rate cut, with 34% odds still seen for a larger 50 bps reduction, according to the CME’s FedWatch Tool. Traders also closely monitored the first debate between Kamala Harris and Donald Trump. In regular trading on Tuesday, the Dow fell 0.23%, while the S&P 500 and Nasdaq Composite gained 0.45% and 0.84%, respectively. The real estate, consumer discretionary and technology sectors outperformed the market, while the energy and financial sectors were the only decliners. Oracle jumped 11.4% after beating earnings estimates and securing a deal with Amazon Web Services. Meanwhile, GameStop tumbled 10.4% in after-hours trading as the company amended an open market sale agreement filed with the US SEC.
The Nikkei 225 Index fell 1.5% toward 35,600 while the broader Topix Index dropped 1.9% to 2,527 on Wednesday, extending losses from the previous session following hawkish statements from a Bank of Japan policy maker. BOJ board member Junko Nakagawa said that the central bank will continue raising interest rates if the economy and inflation moves in line with its forecasts. The yen climbed to year-to-date highs following her remarks, putting more downward pressure on domestic equities. On the economic front, manufacturing sentiment in Japan declined to a seven-month low in September amid concerns about soft Chinese demand. Notable losses were seen from index heavyweights such as Disco Corp (-2.1%), Advantest (-2.1%), Mitsubishi Heavy Industries (-3.1%), Toyota Motor (-3.2%) and Fast Retailing (-1.4%).
The Shanghai Composite fell 0.8% to around 2,720 while the Shenzhen Component rose 0.4% to 8,107 in mixed trade on Wednesday, with mainland stocks struggling for clear direction amid lingering economic and policy uncertainties in China. Earlier this week, data showed that China’s trade surplus widened in August as exports grew more than expected, while imports missed forecasts amid soft domestic demand. Previous data also showed that the country’s consumer inflation rose less than anticipated last month, while producer deflation deepened. Markets now look ahead to Chinese retail sales and industrial production data later this week. Notable losses were seen from Dazhong Transportation (-10%), China Yangtze Power (-3.3%) and Triumph Science & Technology (-9.4%). Meanwhile, BYD Company jumped 4% after reporting a higher sales target for this year.
The DAX dropped 0.9% to 18,279 on Tuesday, hitting its lowest level since mid-August, as auto stocks weighed on the index. Continental shares plunged over 10% after the car parts supplier announced provisions in the mid double-digit million euro range due to a warranty issue with one of its brake systems. BMW cut its 2024 profit margin guidance, citing problems with Continental’s brakes and other factors, sending its shares down 11%. Mercedes-Benz AG also fell, losing more than 4%. Meanwhile, Volkswagen (-3%) said it was scrapping six labor agreements as the company’s standoff with unions and its works council intensified. On the economic front, Germany's inflation rate was confirmed at 1.9%, the lowest since March 2021. Looking ahead, traders remain cautious ahead of key U.S. inflation data and the European Central Bank's monetary policy decision later this week.
