Markets Steady After Stronger CPI
US stock markets experienced a choppy day yesterday but ultimately closed close to flat after CPI data came in slightly stronger than expected. All three of the major indexes closed close to flat, the Dow up just 0.04%, the S&P losing 0.07% and the Nasdaq finishing with no change on the day. US treasury yields dropped lower despite the better-than-expected inflation data, the benchmark 10-year down 5 basis points to 3.98% and the 2-year off 11 basis points to trade at 4.26%. The dollar also lost ground against the majors with the Euro grinding up to 1.0980 with most remaining in familiar ranges. Oil also gained some more ground climbing 1% by the end of day’s trading and Gold traded back to the $2,030 level having dropped as far as $2,010 after the data.
Tepid Market Reaction to CPI
Some traders have kicked off the Asian trading day with slightly bemused looks on their faces after stronger than expected CPI data in the US did not lead to what would have been the expected reaction in the US markets. The dollar and US yields actually dropped, and stocks remained steady when you would normally have expected the opposite reaction. Bets have now increased to 73% that we will see a rate cut in March despite the stronger inflation print and more Fed officials’ comments, with both Loretta Mester and Tom Barkin advising that the CPI number did little to assure them that inflation was on track to hit 2%. Traders are now assessing the situation to see whether we are going to see a delayed reaction to the number later today or if the market is happy to steam ahead with its own view on where things are going, it could lead to a very busy day ahead.
Busy End to the Week for Traders Ahead
Focus will swiftly move from US inflation data to Chinese inflation data after the Asian trading session gets going today. The release of the Chinese CPI data is due out midway through the day with expectations for a drop of 0.4% for the year-on-year number. The UK comes into play once more on the European open with the monthly GDP data due out, a 0.2% increase is expected for the monthly data print and we have the second inflation number of the week out of the US soon after Wall Street kicks off, this time in the form of the headline and Core PPI numbers, 0.1% and 0.2% increases are expected respectively.
