Eurostoxx futures rose by 0.3% during early trading in Europe. This increase comes as markets stabilize after the volatility caused by the US jobs report released on Friday. In Europe, German DAX futures rose by 0.4%, and UK FTSE futures climbed by 0.3%. Meanwhile, S&P 500 futures in the US went up by 0.1% after some last-minute buying followed a dip last week.

Market Participants Remain Cautious

As the new week begins, market participants are cautious. They are paying close attention to the US inflation data due this Thursday, even though it’s during the FOMC blackout period. We’re seeing a slightly positive start to the week, with European and US futures gaining ground after some buying late on Friday helped Wall Street avoid a worse finish. This suggests a cautious atmosphere as we process the impact of the latest US jobs report. The market is clearly alert as the new trading week begins. The US jobs report on September 5th showed a strong addition of 210,000 jobs, beating expectations. Wage growth remained steady at 4.2% year-over-year. Initially, this economic strength pleased investors, but it later raised concerns that the Federal Reserve might keep its policy tight. The bond market reacted, with the 10-year Treasury yield hitting 4.35% briefly before returning to lower levels. Now, all eyes are on the US inflation data set for this Thursday. This is the last important report before the FOMC meeting’s blackout period ends. Analysts expect the headline CPI to rise to 3.4%, slightly up from last month’s 3.3%. If the number exceeds expectations, we could see significant market volatility.

Attention Shifts to US Inflation Data

This data is vital because fed funds futures currently indicate about a 45% chance of another rate hike at the FOMC meeting on September 17th. A higher inflation number could push those odds over 50%, leading to a major reassessment of risk assets. We anticipate increased volatility around this report. Given this upcoming risk, we expect the VIX index, which closed last week near 14, to rise in the coming days. Derivative traders might want to consider strategies that benefit from this potential increase in implied volatility, such as buying straddles on major indices. These strategies can profit from a large price move in either direction following the inflation report. In Europe, the gains in Eurostoxx are also supported by the European Central Bank’s decision last week to keep rates steady. However, with service sector inflation still high across the continent, any signs of ongoing US inflation could dampen sentiment here as well. We’re closely watching currency derivatives, as unexpected hawkish moves from the Fed could strengthen the dollar and impact European exporters. Create your live VT Markets account and start trading now.

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