US pre-open: Markets to extend gains on hopes Fed tightening is over

(Sharecast News) - US stock markets were set to rise again on Wednesday, extending big gains made the previous session after data showed that inflation eased more than expected in October. Futures on the Dow Jones Industrial Average were up 0.3% in pre-market trade, while the S&P 500 rose 0.4% and the Nasdaq gained 0.5%.

On Tuesday, the S&P 500 and Nasdaq put in their best daily performances in April after the consumer price index rose by just 3.2% year-on-year last month, down from 3.7% in September. Core inflation unexpectedly declined to 4% from 4.1% previously.

Many Federal Reserve policymakers had made comments in the past week indicating that they wouldn't hesitate to hike rates again if inflation didn't start coming down towards the 2% target, so Tuesday's downside surprise came as welcome relief.

Over in the UK on Wednesday, trading sentiment was also boosted by a bigger-than-forecast drop in inflation, with the annual rate of consumer price growth sinking to a two-year low of 4.6% in October, from 6.7% the month before.

"US markets look set for another bumper day, with falling inflation in both the US and UK helping to drive home expectations that the next move from the FOMC and BoE will be to cut rates rather than raise them," said analyst Joshua Mahony from Scope Markets.

"The repricing of market expectations for a Fed hike in December or January has seen the 15% chance fall to a mere 1%, essentially ruling out any additional tightening," Mahony said.

Meanwhile, markets across Asia surged overnight too, after Chinese retail sales and industrial production grew more than predicted in October, while market chatter highlighted the possibility of further stimulus measures for the Chinese housing sector. The Hang Seng index rose nearly 4%, while the Nikkei 225 gained 2.5%.

Looking ahead to Wednesday's US economic data schedule, the New York manufacturing index will be released, along with US retail sales, the producer price index and business inventories.

In company news, retailers Target and TJX will be reporting earnings figures before the opening bell, hoping to impress the market like peer Home Depot did on Tuesday.

General Motors futures edged higher despite reports that UAW workers at its factories have voted against a proposed labour pact.