Lower-than-expected US consumer inflation is adding to market sentiment

A tamer-than-expected US inflation report for September inspired optimism in markets. The traders are now betting that the Federal Reserve will almost certainly cut rates at its October meeting — scheduled for later this week — as well as at its December meeting.

Major U.S. indexes climbed on Friday and were in the green for a second week in a row, with S&P 500, Nasdaq Composite and on Dow Jones Industrial Average all up about 2% for the week.

The inflation report offers further support for markets already buoyed by a strong earnings season. Of the companies that have reported so far, 87% managed to beat Wall Street expectationsmuch higher than the typical beat rate of 67%, according to LSEG. If Big Tech earnings this week top estimates — and provide bullish guidance — markets could see new highs.

However, US President Donald Trump’s tariffs are still cold overhangs against the background of heated sentiments. On Saturday, Trump hit Canada with an additional 10 percent tariff as a penalty for advertising.

Economists warn that tariffs will lead to higher prices. Indeed, while the CPI report came in below estimates, September’s core annual rate rose to 3% from previous month 2.9%.

“Inflation may not be slowing, but it is no longer surprisingly on the upswing,” he said David Russell, Global Head of Market Strategy at TradeStation.

With the absence of other data, such as the jobs report, due to the US government shutdown, we don’t have the full picture of how the economy is performing – so rising markets could be balanced on a precarious edge.

Trump hits Canada with additional 10% tariffs. This brings general duties for Canada up to 45%. Ontario said it would pull its ad featuring Ronald Reagan criticizing tariffs — which angered Trump — after the first two games of the World Series.

Trade Development at the ASEAN Summit. Senior US and Chinese officials met on Sunday as a result “a very successful framework” of talks between Trump and Xi, according to US Treasury Department Scott Bessant. Trump announced agreements with four Southeast Asian countries.

US inflation rose less than expected. The consumer price index for September stood at 0.3% for the month, putting the annual rate at 3%. Both figures were 0.1 percentage points below the 0.4 percent and 3.1 percent, respectively, expected by a Dow Jones survey of economists.

Stocks rise after CPI report. Major indexes rose on Fridaywith the Dow Jones Industrial Average closing above 47,000 for the first time. The pan-European Stoxx 600 add 0.23%, recovery of previous losses. US stock futures rose on Sunday evening in the States.

(PRO) A busy week of earnings and meetings ahead. This week, five of the Magnificent Seven stock group – all but Tesla and Nvidia — will report their financial results, the US Federal Reserve will meet and The meeting between Trump and Xi may finally happen.

Trump will meet China’s Xi for the first time in his second term as a trade deal remains elusive

White House Press Secretary Carolyn Leavitt told reporters last week, Trump will meet his Chinese counterpart Xi Jinping on October 30 on the sidelines of the Asia-Pacific Economic Cooperation, or ATIS, summit.

It will be the first face-to-face meeting between the two heads of state since Trump returned to office in January. The high-stakes meeting comes as delicate trade tensions between the economic superpowers near an expiration date on November 10 if they fail to agree a new extension.

— Annie Bao