Global Markets Hold Gains, Eyes on CPI Data and Rate Cut Expectations

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Global markets maintained their gains on Tuesday following a tech-led rally on Wall Street and lower oil prices. U.S. benchmark treasury yields rose, contributing to the overall positive sentiment. However, concerns about the timing of U.S. Federal Reserve interest rate cuts linger, with eyes on the upcoming Consumer Price Index (CPI) data.

Key Points:

  • Global Market Performance:
    • MSCI’s world share index remained flat after a 0.9% jump on Monday.
    • Europe’s STOXX 600 index dipped 0.14%, drifting from a two-year high.
    • U.S. share futures decreased by 0.3%.
  • Asian Markets:
    • Japan’s Nikkei hit a new 33-year high, led by chipmakers following Nvidia’s record high close.
    • Asian markets showed resilience, with positive momentum.
  • Individual Stock Movements:
    • London-listed fund manager Jupiter witnessed a 12% decline, citing net outflows of £2.2 billion for 2023 and the departure of a star manager.
    • Grifols shares plunged over 40% after hedge fund Gotham City Research questioned its accounting practices. Grifols denied the allegations.
  • Upcoming Macro News:
    • The key economic event of the week is Thursday’s release of the U.S. Consumer Price Index (CPI) for December, influencing expectations for Fed interest rate cuts.
  • Rate Cut Expectations:
    • Traders slightly adjusted expectations of near-imminent rate cuts, reflecting a 58% chance of a rate cut at the Fed’s March meeting.
    • Some analysts expect the Fed to start cutting rates from June.
  • Bond Yields:
    • Rising rate cut expectations impacted government bonds. The benchmark 10-year Treasury yield rose to 4.042%, up from a five-month low in late December.
    • Germany’s 10-year bund yield also increased, standing at 2.19%.
  • Oil Prices:
    • Oil prices rebounded after previous declines, with Brent crude and U.S. crude futures up around 1.2%.
  • Gold and Currency Markets:
    • Spot gold was up 0.4% at $2036.1 an ounce.
    • Currency markets were relatively quiet, with the euro steady at $1.0945.
  • Dollar Movement:
    • The dollar, having gained moderately against European peers, is influenced by the year’s move higher in yields.
    • Market sentiment suggests a conviction that the Federal Reserve might cut rates this year.

Summary: Global markets held onto their gains, driven by a tech-led rally, lower oil prices, and rising treasury yields. Attention is on the upcoming U.S. CPI data, influencing expectations for Federal Reserve interest rate cuts. Despite positive momentum, concerns about rate cut timing persist, impacting various asset classes and individual stocks.

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