Market Calm Before Data Storm: Inflation Insights Awaited

Stocks, bonds, and oil prices steadied as markets awaited key U.S. inflation data. Europe's STOXX 600 saw minor fluctuations while U.S. futures held a cautious tone. Japan's Nikkei surged post-holiday. Investors remain on edge for the Federal Reserve's next policy move amid recent market volatility and inflation fears.

Stocks, bonds, and oil prices held steady on Tuesday as markets braced for pivotal data releases later in the week, notably U.S. inflation numbers, which could provide clarity on the Federal Reserve's policy direction after last week's market turbulence. Europe's STOXX 600 index dipped 0.1% in light trading, with investors refraining from big moves ahead of the U.S. producer price data due at 1230 GMT.

U.S. stock futures reflected the cautious sentiment, with S&P 500 E-minis up 0.22% and Nasdaq 100 E-minis gaining 0.32%, while Dow-linked futures dipped following Home Depot's profit forecast. Japan's Nikkei saw a 3% jump after a holiday, providing a welcome relief after last week's extreme market swings triggered by yen fluctuations and recession fears in the U.S.

Investors are keenly eyeing the Federal Reserve's next steps, with this week's data likely to refine predictions. Current market sentiment is split between a 25 basis-point or 50 basis-point cut in September, pricing in 100 basis-point cuts for the year. The yen's renewed strength and its impact on the dollar, bolstered by leveraged fund movements, add another layer of complexity to the market's outlook.

(With inputs from agencies.)