- Dollar steady ahead of Thursday’s US inflation data
- Copper floats at the end of China’s COVID restrictions
- Crude Oil Reverses Losses to Climb Higher
- Earnings from major US banks are expected on Friday
LONDON, Jan 11 (Reuters) – Wall Street was poised to join the global rise in stock prices on Wednesday on hopes that US inflation and earnings numbers due later in the week will point to a resilient Economy and slower rate hikes suggest.
However, markets were largely subdued as investors waited to see how Thursday’s US consumer price index (CPI) could affect Federal Reserve deliberations.
Meanwhile, the dollar remained stable and gold flat after hitting an eight-month high on bets that US inflation data will show a slowdown in price increases.
Crude oil prices shrugged off early losses to climb higher, while copper surged above $9,000 a tonne for the first time since June on hopes Chinese demand will rebound after the country lifted its COVID-19 restrictions.
US stock index futures were firmer.
Stocks continued to build on their gains for 2023, with investors hoping that last year’s downturn will not be repeated and that an economic recession will be shallow or even avoided.
The MSCI All Country Stock Index (.MIWD00000PUS) rose 0.16%, contributing to annual gains of nearly 3% after falling nearly 20% last year, prompting analysts to ponder how far away they are from stocks to bonds should change.
“We’re having a warmer winter, recession risks are receding and consequently there’s a perception that things might not be that bad and that’s driving equity markets higher, particularly in Europe,” said Mike Hewson, chief markets analyst at CMC Markets .
In Europe, the STOXX (.STOXX) index of 600 companies rose 0.5% to levels last seen around mid-2022.
Mark Tinker, chief investment officer at Toscafund Asset Management in Hong Kong, said that after the 2022 bear market, investors are trying to decide whether there will be further downside this year before markets stabilize.
“What we have now is the disagreement – do we have a second leg ahead of us?” Tinker said, adding that this prompted investors to take small bets on the markets, which helped set a more positive tone.
“There isn’t really a prevailing belief yet. At the moment people are trending a bit away from ‘there will be a second leg,'” he said.
The US earnings season kicked into higher gear on Friday, with results from major banks including Bank of America (BAC.N), JPMorgan Chase (JPM.N), Wells Fargo (WFC.N) and Citigroup (CN), the clues provide on the economic outlook.
Goldman Sachs (GS.N) employees were eager for news on whether they will keep their jobs in a cull instigated after a massive slowdown in business deals since the war in Ukraine.
Reuters graphics
CPI WATCH
Investors’ attention will turn squarely to US consumer price data due out on Thursday. The figures are expected to show annual headline inflation at 6.5% in December, down from 7.1% in November.
Thursday’s data will be crucial in determining what the Fed is likely to do with interest rates at its next meeting in early February.
“Equities markets celebrated the lack of clear guidance on policy direction, with some expectations that Powell was likely to backtrack on easing financial conditions,” Saxo strategists said.
ING Bank said business surveys are pointing to a slowdown in the US economy and if inflation allows, the Fed will be able to ease policy later this year.
MSCI’s broadest index of Asia Pacific equities outside Japan (.MIAPJ0000PUS) rose 0.2% to hit a six-month high, while Japan’s Nikkei (.N225) gained 1%. Australia’s S&P/ASX 200 Index (.AXJO) rose 0.9%.
Hong Kong’s Hang Seng Index (.HSI) rose 0.5%, buoyed by hopes of a strong economic recovery from the COVID-19 pandemic and discounted equity values.
Stocks rise on hopes reopening
The dollar index, which measures its performance against six major currencies, rose 0.184% to 103.44 after hovering near a seven-month low.
The Japanese yen rose 0.4% to $132.8 per dollar, while the pound sterling fell 0.3% to $1.2115.
The 10-year Treasury note yield was lower at 3.5853%. The US 2-year Treasury yield, which normally moves in step with interest rate expectations, fell to 4.492%.
Euro-zone government bond yields fell as a further fall in energy prices prompted investors to become more optimistic about the inflation outlook.
US crude was up 0.7% to $75.66 a barrel, while Brent crude was up 0.7% to $80.72.
Reporting by Huw Jones and Ankur Banerjee Editing by Bradley Perrett, Himani Sarkar, Tomasz Janowski and David Goodman
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