The S&P/ASX 200 Index (ASX: XJO) is enjoying a strong run today.
The benchmark index was up 0.5% in earlier trade but slipped to currently be up 0.2% following strong July employment growth reported by the ABS at 11:30am AEST.
Also on the domestic front, the benchmark index is being both pushed higher and pulled lower as investors digest the latest financial results reported by a range of top stocks this morning. Some results pleased to the upside, while others disappointed.
But the ASX 200 looks to only be getting tailwinds from the latest inflation data from the United States, released overnight Aussie time.
Here's what's happening.
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ASX 200 rises on cooling US inflation
The ASX 200 is following the lead of US markets, where the S&P 500 Index (SP: .INX) closed up 0.4% overnight, marking its fifth consecutive trading day of gains.
This comes as markets increase the odds that the Federal Reserve will cut interest rates in the world's biggest economy at its next policy meeting on 18 September.
Fuelled by higher housing costs, the consumer price index (CPI) increased by 0.2% in July. However, investor enthusiasm was stoked as the annual rate of inflation slipped to 2.9%, down from 3.0% at the end of June.
This sees US inflation back at levels not witnessed since March 2021.
This has all but locked in a 0.25% interest rate cut at the Fed's next meeting.
Investors are now pondering whether the world's most influential central bank will make an even bigger easing move and reduce interest rates by 0.50%. A cut of that size would likely spur a fresh rally in US stocks and offer a healthy boost to the ASX 200 as well.
What are the experts saying?
Commenting on the US inflation data helping to boost US stocks and the ASX 200 today, Morgan Stanley's Chris Larkin said (courtesy of Bloomberg):
Now the primary question is whether the Fed will cut rates by 25 or 50 basis points next month. If most of the data over the next five weeks points to a slowing economy, the Fed may cut more aggressively.
UBS Global Wealth Management's Brian Rose added:
The inflation data has been good enough to allow the Fed to start cutting rates in September but does not give them a reason to cut aggressively. The decision whether to cut by 50 basis points instead of the usual 25 basis points may come down to the August labour report.
Indeed, that's just what Federal Reserve Bank of Chicago president Austan Goolsbee said when he was asked about the Fed's mandate to balance inflation and employment risks.
"It feels like, on the margin, I'm getting more concerned about the employment side of the mandate." Goolsbee said.
As for the ASX 200, if it stays in the green, this will also mark the fifth consecutive day of gains for the Aussie benchmark index.
