H.C. Wainwright assumes coverage on Valneva stock with Buy rating

Upcoming US economic data for July indicates a projected increase in inflation, with CPI and Core CPI (MoM) forecasts rising to 0.3% and 0.4% respectively from prior 0.1% levels, alongside stable Building Permits and a slight dip in Housing Starts. The Atlanta Fed's Q3 GDPNow remains at 2.5%. Concurrently, Asian equity markets are broadly lower, while commodity prices show mixed performance, with energy futures (WTI crude, natural gas) experiencing declines.

Analysis

The market is positioned for a significant uptick in US inflation, with July's month-over-month CPI and Core CPI forecast to accelerate to 0.3% and 0.4% respectively, a notable increase from the prior 0.1% readings. This anticipated inflationary pressure contrasts with a mixed housing market outlook, where Building Permits are expected to remain stable at 1.39M while Housing Starts are projected to decline to 1.29M. Meanwhile, the Atlanta Fed's Q3 GDPNow forecast holds steady at 2.5%, suggesting underlying economic growth expectations remain intact for now. In the markets, this anticipation is manifesting as broad-based caution, with major Asian equity indices like the Hang Seng, China A50, and Nikkei 225 all posting minor losses. The commodity complex is bifurcated: precious metals, including Gold and Silver, are seeing modest gains, while energy futures are experiencing notable declines, with WTI Crude down 0.80% and Natural Gas falling 2.01%. The US Dollar Index shows slight weakness ahead of the data release, trading down 0.16%.

Key Decisions for Investors

• Investors should monitor the upcoming US CPI data closely, as a print exceeding the forecasted 0.3-0.4% acceleration could intensify expectations for a hawkish monetary policy response, potentially creating headwinds for equities and fixed income.
• The divergence between rising precious metals and falling energy prices suggests a cautious market sentiment; consider exposure to inflation hedges like gold (GLD) while remaining wary of assets tied to industrial demand, such as oil (USO) and copper (CPER), which are showing weakness.
• Given the conflicting signals from stable GDP forecasts and weakening housing starts, it is prudent to watch for further deterioration in housing data as it could be a leading indicator of a broader economic slowdown.
• The slight decline in the US Dollar Index (UUP) ahead of potentially strong inflation data may present a tactical opportunity, as a high inflation reading could trigger a sharp reversal and dollar strength.