US stock futures indicated a positive opening on Friday, with Dow Jones futures gaining around 0.6%, or 299 points, while S&P 500 futures and Nasdaq-100 futures also rising about 0.6%, according to Live Mint. The rise comes as crude oil prices retreated sharply ahead of the key US inflation report, with Brent crude futures falling $4 a barrel to $104.14 after rising above $108 earlier. Despite Friday's pullback, crude prices remained up about 9% for the week, offering relief to equity markets after crude surged this week amid escalating tensions in West Asia. The positive sentiment comes as investors await the August Consumer Price Index (CPI) report, due later today, which is the final major inflation reading before the Federal Reserve's September 15-16 policy meeting. The S&P 500 is on track for its worst week since June after falling 0.6% on Thursday for its fourth consecutive losing session, with the blue-chip Dow also headed for its steepest weekly decline since March, as reported by Live Mint.
Brent crude prices have backed away from extremes after briefly pushing close to $110 per barrel, easing some of the immediate heat from the inflation trade, as reported by Investing.com. The move appears less like Washington suddenly waving an olive branch and more like the market shaving off catastrophe premium after reports that Gulf foreign ministers are preparing to meet Iranian officials in Salalah, Oman, to carve out a temporary arrangement for shipping through the Strait of Hormuz. Regional states hope a temporary shipping agreement between Iran and Oman can offer a pathway to ease hostilities and eventually reopen the Strait, providing relief for a market starved of diplomatic progress. With crude still sharply higher on the week and Middle East supply risks far from resolved, this remains relief rather than resolution, but even a modest thaw is enough to take some fear out of the price. Since last week, Brent crude prices have risen nearly 9% in the last five market sessions and have gained over 18% in the last one-month period.
Investors are now awaiting the August Consumer Price Index (CPI) report, due later today, which is the final major inflation reading before the Federal Reserve's September 15-16 policy meeting, according to Live Mint. Economists surveyed by Dow Jones expect consumer prices to have increased 0.4% month-on-month in August, with annual inflation at 3.4%, unchanged from July. The CPI report is expected to show an acceleration in inflation in August from the previous month, partly due to higher gasoline costs, with core CPI projected to have risen at a more moderate pace excluding volatile food and energy components. According to Bloomberg, economists forecast the consumer price index to advance 0.4% in August, up from a month earlier, primarily due to higher gasoline costs. Fed funds futures were pricing in roughly a 71% probability of a rate hike next week, according to CME Group's FedWatch tool. Some Fed officials have signalled that the rate decision could depend on what this week's inflation reports reveal. Christopher Hodge, chief US economist at Natixis CIB Americas, said the inflation reading will be key to the Fed's decision, as reported by CNBC. "A reading in line with consensus would represent the fourth consecutive month of encouraging inflation readings and ease pressure for a hike by the Fed in September," Hodge said. "If inflation comes in hotter than consensus, we expect a hike at next week's meeting."
Oracle shares jumped 5.5% in premarket trading on Friday following better-than-expected fiscal first-quarter earnings that allayed Wall Street's worries about the company's aggressive, debt-driven AI data centre buildouts, according to NDTV Profit. The company's booking of over $30 billion in new AI cloud contracts was a major factor in the jump, pushing its remaining performance obligations (backlog) to a record $664 billion, comfortably exceeding analyst projections of $639.89 billion. This strong performance provided crucial support to the technology sector ahead of the market open, offering some relief from the broader inflation concerns that have weighed on tech valuations. The gains in Oracle offered some support to the broader technology sector, while the weakness in Adobe highlighted concerns about tech valuations amid rising inflation. European stocks edged higher on Friday but remained headed for their worst weekly performance since April as rising bond yields and inflation concerns weighed on sentiment, according to Reuters. The European Central Bank responded to rising price pressures by raising its key deposit rate by 25 basis points to 2.5% from 2.25%, adding to the broader focus on how central banks are responding to persistent inflation.
The inflation concerns come as tensions in the Middle East escalate further, with Iran-backed Houthi militants in Yemen reportedly advancing towards Red Sea coastal areas bordering the Bab el-Mandeb Strait, according to Live Mint. A successful push could further tighten their grip on the waterway, threatening deeper disruption to another key route for shipments from the Middle East. The development came hours after President Donald Trump said he expected the Iran war to end after the US midterm elections. Crude's inflationary impact was also evident in US diesel prices, which rose above $6 a gallon for the first time. The pressure from higher energy prices is also weighing on the demand outlook, with the International Energy Agency cutting its forecast and saying consumption may need to decline further. Bond yields have also followed the sharp rise in oil prices, with longer-dated securities touching multi-decade highs this week, amid concerns that higher energy costs could put further upward pressure on inflation.
