What’s influencing markets: an increase in the U.S. CPI and a legal victory for the Microsoft-Activision deal

Markets will be heavily focused on the publication of June inflation data from the United States as investors look for any hints regarding the Fed’s potential interest rate path. In other news, Nvidia and Arm are allegedly in negotiations about the semiconductor giant being an anchor investor in the upcoming IPO of the U.K. chip designer. Microsoft wins a surprising legal battle against Activision Blizzard over their megamerger with “Call of Duty” in the meanwhile.

  1. The U.S. CPI is important

Although it is anticipated that U.S. inflation grew at its weakest rate in more than two years in June, stickiness in so-called “core” prices may still influence Federal Reserve officials to continue their recent campaign of tightening monetary policy.

Consumer price index (CPI) growth for the previous month is predicted to be 3.1% yearly, down from 4.0% in May, according to the Bureau of Labor Statistics. It would be a sharp decline from the figure of 9.1% in June of last year and the lowest level since March 2021.

On a monthly basis, it is anticipated that the number increased from 0.1% in the previous month to 0.3% this month.

Meanwhile, it is projected that the increase in core CPI, which excludes more erratic categories like food and energy, will have moderated to 5.0% annually and 0.3% monthly.

Stubborn core readings have encouraged rumors that the Fed will raise interest rates later this month after pausing its raising cycle in June, despite the headline number edging closer to the Fed’s 2% target.

  1. U.S. futures remain stable.

As investors anticipated the publication of the crucial inflation data, U.S. stock futures largely traded near their flat line on Wednesday.

The Dow futures increased by 48 points, or 0.14%, the S&P 500 futures by 8 points, or 0.18%, and the Nasdaq 100 futures by 32 points, or 0.21%, at 05:17 ET (09:17 GMT).

The report, which is scheduled to be released at 08:30 ET, will be carefully scrutinized for any hints as to the future direction of Fed policy.

At the central bank’s July meeting, there is a greater than 91% likelihood that interest rates will be raised by a quarter-point, according to Investing.com’s Fed Rate Monitor Tool. However, it is still unclear what decision-makers will make moving ahead. The producer price index on Thursday and the CPI statistics today may shed some light on this important matter.

  1. Nvidia in discussions to be lead investor in Arm IPO – FT

According to unidentified sources quoted by the Financial Times, U.K.-based chip designer Arm is purportedly in talks to enlist Nvidia (NASDAQ:NVDA) as an anchor investor in its upcoming initial public offering.

According to the persons who spoke to the FT, Arm is hoping that Nvidia, which earlier this year became the first chipmaker to reach a valuation of more than $1 trillion, will take a long-term investment at its IPO stage.

According to reports, the topic of conversation is Arm’s possible valuation. According to a source cited by the FT, Nvidia plans to bid at a share price that would put Arm’s overall value between $35 billion and $40 billion. Arm, meanwhile, prefers a value closer to $80 billion.

The potential involvement of Nvidia might support Arm’s IPO efforts by allaying investor fears.

Both businesses have already gotten in touch with American regulators, according to the FT, in an effort to allay any concerns. The sale of Arm by Japan’s SoftBank (TYO:9984) to Nvidia for $66 billion was abandoned last year after competition authorities in the US, UK, and EU raised reservations about the deal.

  1. Microsoft prevails in American legal battle regarding Activision purchase

An enormous boost was provided to Microsoft’s (NASDAQ:MSFT) $69 billion megamerger with Activision Blizzard (NASDAQ:ATVI) after a federal court judge on Tuesday dismissed U.S. antitrust concerns regarding the deal.

The Federal Trade Commission, which had asked for an injunction to prevent the merger from going through, failed to demonstrate that the deal will “substantially lessen competition” in the video game subscription or cloud gaming sectors, according to U.S. District Judge Jacqueline Scott Corley in San Francisco.

Activision’s stock increased by more than 10% on Tuesday.

Regulators have raised concerns that Microsoft would exploit the acquisition of Activision, the company behind the well-known video game “Call of Duty,” to drive out rivals like the Nintendo (TYO:7974) and Sony (TYO:6758) PlayStation. Now, the FTC has until Friday to file an appeal of the judgment.

The U.K.’s antitrust watchdog is suddenly the center of attention. The UK’s Competition and Markets Authority (CMA), which had officially barred the merger in April, stated shortly after the U.S. court decision that it was open to Microsoft changing the terms of the Activision agreement in order to allay its concerns. The announcement was interpreted as an indication that the CMA may be easing its opposition.

  1. Oil rises on expectations of demand

As expanding U.S. crude stocks were tempered by expectations of greater demand, oil prices stabilized on Wednesday.

In its short-term energy projection, the U.S. Energy Information Administration predicted that demand will surpass supply by 100,000 barrels per day in 2023 and by 200,000 barrels per day in 2024.

Russia and Saudi Arabia, two major oil producers, have also announced substantial cuts to their August output. As investors wagered that the Fed may be nearing the end of its rate-hiking cycle, the U.S. dollar fell to a two-month low, bolstering the oil market.

The American Petroleum Institute’s report, however, which revealed that U.S. oil stockpiles unexpectedly increased by more than 2 million barrels in the week leading up to July 7, dampened the gain.

By 05:17 ET, Brent crude prices were up 0.20% to $79.56 per barrel, while U.S. crude futures were up 0.27% at $75.03 per barrel.