Asian stock markets traded mixed as investors braced for key USA inflation data that could influence Fed policy.
CPI forecasts dominate attention with rates, currencies quiet pre-release.
As Asia observes holidays in major financial centers such as China, Japan, and Singapore, the global market outlook remains subdued.
Wayne Cole provides insights into the day ahead in European and global markets amidst the backdrop of impending USA inflation data.
While Lunar New Year celebrations extend to New York State, Wall Street remains operational, albeit with subdued activity.
USA stock futures exhibit minimal movement, while European equity and Treasury futures show slight gains, with a marginal softening of the dollar.
Analysts forecast a 0.2% month-on-month increase in headline Consumer Price Index (CPI) and a 0.3% rise in core CPI for January.
Analysts forecast the annual US CPI slowing to 3.0%, a return to mid-2021 rates, while estimates expect core CPI to ease to 3.8%, its lowest since mid-2021. Used car prices likely drag the index down further. Rent growth deceleration garners intense focus as a key indicator of inflation trajectory.
The range of estimates for core CPI, spanning from +0.1% to +0.3%, suggests a bias towards the downside. Despite seasonal adjustment revisions released last Friday, indicating marginal changes in the six-month annualized pace, futures indicate diminished expectations of a March rate cut, with probabilities reduced to 17%, while a May easing stands at approximately 80%.
Market sentiment implies a total of 121 basis points in rate cuts for the year, reflecting a decline from 145 basis points observed a few weeks ago. Noteworthy, this week’s calendar features numerous Fed speakers, including Governor Christopher Waller, whose remarks are closely monitored for insights into monetary policy direction.
Additionally, US retail sales data, anticipated to show a 0.1% overall decline but a 0.3% increase excluding autos, will provide further cues on consumer spending trends. In the UK, CPI data and Q4 GDP readings are expected, potentially confirming a technical recession, presenting a challenge for the government amidst upcoming by-elections.
On the corporate front, inflationary pressures are evident in sectors like chocolate, with cocoa prices surging 16% last week to record highs. Poor harvests in major cocoa-producing regions, compounded by weather patterns, contribute to a 40% price hike since the year’s onset, underscoring concerns about sustained inflationary pressures.
Earnings reports from USA companies
In the coming week,USA market focus will be on earnings reports from companies such as Kraft Heinz, Coca-Cola, and Restaurant Brands, with particular attention to cost dynamics and margin pressures. Other notable companies reporting include Airbnb, Marriott, MGM Resorts, Cisco, Lyft, DoorDash, and Deere, providing insights into broader economic trends.
USA Key market-moving developments on Monday include speeches
Key market-moving developments on Monday include speeches from Bank of England Governor Andrew Bailey, ECB Chief Economist Philip Lane, ECB board member Isabel Schnabel, and Bank of Spain Governor Pablo Hernández de Cos, alongside remarks from Fed Presidents Michelle Bowman, Thomas Barkin, and Neel Kashkari.
As global markets navigate through the week, attention remains firmly fixed on economic indicators and central bank communications, USA shaping investor sentiment and market dynamics.
