Global markets experienced a positive shift on Tuesday, accompanied by a weakening dollar, as investors eagerly anticipated the release of U.S. inflation data. The outcome of this data could potentially impact the Federal Reserve’s decisions regarding interest rate hikes. Additionally, the prospect of China’s support for economic growth contributed to the rise in commodity prices, particularly oil and copper.

The MSCI All-World index saw a 0.3% increase, driven by gains in European shares, including the STOXX 600, which rose 0.35% during early trading. Chinese equities in Asia also played a role in the upward trend, following the announcement of extended support for the country’s property sector. U.S. stock index futures indicated a modest rise at the opening bell, suggesting a positive start to the trading day.

Investors carefully analyzed comments from various Federal Reserve officials, who acknowledged that the current level of inflation warranted additional rate hikes. However, they also indicated that the central bank’s tightening cycle was nearing its end. With U.S. inflation data scheduled for release on Wednesday, market participants are eagerly awaiting insights into the future of interest rates.

Economists polled by Reuters anticipate a 3.1% rise in the consumer price index for June, following May’s 4% increase. If realized, this would mark the lowest reading since March 2021. The core rate, which excludes volatile food and energy prices, is expected to decline for the third consecutive month to 5% from 5.3%. Nevertheless, it remains significantly higher than the Federal Reserve’s target of 2%.

Last week’s employment report, which revealed fewer-than-expected job additions to non-farm payrolls, triggered a sell-off in the U.S. dollar. However, it had minimal impact on market expectations regarding interest rates.

Craig Erlam, a market strategist at OANDA, emphasized the significance of the upcoming inflation data, stating that it arrives too late to affect the July meeting where a rate hike is already expected. Erlam noted that substantial weakness in inflation figures would be required to alter market expectations.

The U.S. dollar index, which measures the currency against a basket of six others, declined by 0.2% and reached its lowest point in two months. This decline corresponded with a retreat in U.S. Treasury yields. The benchmark 10-year note experienced a decrease of 4 basis points to 3.964%, falling below the 4% mark for the first time in recent sessions.

Jim Reid, a strategist at Deutsche Bank, highlighted the ongoing debate surrounding future inflation levels. While there are increasing signs of near-term disinflationary trends, questions remain regarding whether inflation will persist at uncomfortably high levels in the medium term.

Meanwhile, the Japanese yen strengthened against the dollar, reaching one-month highs and contributing to the U.S. currency’s decline of 0.6% to 140.51 yen. This movement aligned with the drop in Treasury yields.

In China, the potential for a broader economic boost led to an increase in crude oil prices and other industrial commodities such as copper and iron ore. Chinese regulators extended certain policies from a rescue package introduced in November 2022 to enhance liquidity in the struggling real estate sector.

Brent crude, which has struggled to surpass 18-month lows, experienced a 0.4% rise, reaching $78 per barrel. Similarly, U.S. futures rose 0.5% to $73.35.

Copper prices also gained 0.5% on the London Metal Exchange, trading at approximately $8,400 per tonne. However, copper is on track for its first annual loss since 2018, primarily due to inconsistent demand from China.

In the coming days, investors are eagerly anticipating second-quarter earnings reports from major Wall Street institutions, including JPMorgan, Citigroup, and Wells Fargo. Analysts expect a 6.4% decline in earnings for the second quarter compared to the same period last year, according to IBES data from Refinitiv. This will provide valuable insights into the performance of these key players in the financial industry.

Overall, market participants remain cautiously optimistic as they analyze the latest developments and eagerly await the U.S. inflation data, which is expected to shape the future trajectory of interest rates and influence market sentiment.