- Caution set to descend ahead of key US inflation report due out.
- The Consumer Price Index for November is expected to rise by 0.1% to 2.7%.
- The start of China’s key economic meeting buoys hopes of detail on stimulus plans
- Coffee prices look set to trend higher after reaching record levels.
- Oil prices rise as Israel attacks Syria’s naval base increasing uncertainty in the region.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Investors look set to show wariness ahead of a key inflation report due out in the US, while they await more detail about support for China’s struggling economy. The FTSE 100 is expected to open a little lower, as a wait-and-see mood prevails.
There’s hope in the air for more clues about China’s latest stimulus plan, which is helping lift markets mid-week. The FTSE is set to edge higher in morning trade as the Central Economic Work Conference begins with new targets expected to be laid out. With the Politburo having announced a looser monetary stance will be adopted next year, investors are holding out for more fiscal support, bigger spending and lower borrowing. While the plans are still likely to be short on detail this week, the economic priorities set by the conference will be seen as an indicator of how far authorities are willing to go to bolster China’s domestic demand, in the face of looming US tariffs which are set to hamper exports.
Interest rate speculation in the United States is set to heighten when a CPI snapshot of inflation is released later, with the signs are that prices have become more stubborn. Although the consumer price index data, due out later, is not the Federal Reserve’s preferred measure of inflation, it still has influence. If as expected, the headline rate creeps up a little, by 0.1% on the month, it is likely to increase bets of a rate cut next week. Markets are already pricing in a near 85% probability that the Fed will plump for another 0.25% reduction.
Arabica coffee has hit record highs and, with warnings coming thick and fast about poor crops, prices look set to stay volatile and potentially push up further. Climate change concerns are bubbling about the stability of Brazil’s production. The country, which grows almost half the world’s high-end arabica coffee, has seen its output forecast for 2025 to 2026 slashed by around a quarter by traders Volcafe. Severe droughts combined with unpredictable rainfall is also affecting Vietnam’s output. Although the jump in wholesale prices, won’t be felt immediately, consumers are set to see prices rise over the next year, as higher costs filter through to roasters and grocery stores. At a time when a morning caffeine hit is growing in popularity, this could see a fresh wave of shrinkflation hitting the shelves, as companies try and find ways to protect margins, while not hiking prices too dramatically.
Oil prices have edged higher as the Israeli forces have attacked Syria’s naval fleet, amid the political vacuum following the collapse of the Assad regime. The uncertainty about what the future holds for the country, and the wider region has raised concerns about crude supplies. Expectations for firmer detail on China’s economic stimulus programme is also raising hopes of higher demand for energy in the world’s second-largest economy. Brent crude is nudging towards $73 a barrel, rising for the third session in a row.’’
