Global financial markets remained cautious on Wednesday as traders awaited crucial U.S. consumer price data, which could influence the likelihood of a rate cut this year. Investors were also focused on the earnings reports of major banks to determine whether they could meet sky-high expectations.
In Asia, U.S. equity futures showed slight gains, with S&P 500 futures up 0.1% and Nasdaq 100 futures increasing by 0.2%. However, Japan’s Nikkei index reversed early gains and fell by 0.1%, marking its fifth consecutive day of losses. Meanwhile, MSCI’s broadest index for Asia-Pacific shares outside Japan dropped by 0.1%, with Chinese blue-chip stocks falling 0.4% and Hong Kong’s Hang Seng index declining 0.3%.
The U.S. Securities and Exchange Commission also made headlines, filing a lawsuit against tech billionaire Elon Musk for failing to disclose his purchase of more than 5% of Twitter’s common stock in 2022.
On the economic front, U.S. producer price data for December was unexpectedly mild, with the core measure showing no change month-over-month. This weaker-than-expected data led to a retreat in the U.S. dollar and a pullback in short-term Treasury yields. The S&P 500 managed a modest gain of 0.1% by the end of the session. However, futures markets still priced in a modest 29 basis points of easing from the Federal Reserve this year, with the first rate cut not fully anticipated until September. While 10-year Treasury yields initially dipped following the PPI data, they recovered slightly, closing just under the day’s high of 4.809%.
The benchmark U.S. yield in Asia remained steady at 4.786% on Wednesday, as all eyes turned to the U.S. Consumer Price Index (CPI) report scheduled for later in the day. Analysts are predicting a modest 0.2% increase in the core CPI, although risks remain to the upside. A stronger-than-expected reading, particularly one above 0.3%, could prompt another round of selling in stocks and bonds. According to JPMorgan analysts, the CPI data is a key inflection point for markets. A dovish print could reignite the rally, potentially boosting earnings-driven optimism, while a hawkish result could push 10-year yields toward 5%, leading to increased volatility across asset classes.
In addition to CPI data, investors are also focused on the earnings reports of U.S. banks, with major lenders such as Citi and JPMorgan set to release their fourth-quarter results on Wednesday. The banks are expected to report strong earnings, driven by a boom in dealmaking and trading.
Across the Atlantic, the UK remains under scrutiny after concerns about the country’s fiscal health sent government bond yields to their lowest levels in 16 years. The UK’s CPI data, also due Wednesday, is expected to show that underlying inflation rose by 0.5% month-over-month. The pound dipped 0.1% to $1.2198, holding just above its one-year low of $1.2099. The euro, on the other hand, edged up 0.6% overnight to $1.03, while the Japanese yen struggled, retreating by 0.3% to 157.95 yen per dollar, despite the U.S. dollar’s weakness.
In commodity markets, oil prices saw a modest recovery after a more than 1% decline on Tuesday. U.S. crude rose by 0.3% to $77.74 per barrel, while Brent crude edged 0.2% higher to $80.09.
As the markets await further data and corporate earnings reports, investors are bracing for potential volatility, with key economic indicators likely to determine the next phase of market movement.
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US Stock Futures Steady Ahead of Earnings and Inflation Data
