2024-01-12 11:02:05
Mike Dolan provides an update on the US and global markets. Similar to the peculiar nonchalance of debt markets following December’s high inflation, global markets remained calm and oil stable following US and British airstrikes in Yemen aimed at protecting shipping lanes. the Red Sea.
While these actions fuel fears of an escalation of the latest conflict in the Middle East, concrete measures to secure maritime transport are also seen as positive for those worried regarding a prolonged interruption in deliveries of goods and services. an increase in transport costs.
Regardless, oil markets were quite optimistic regarding developments overnight, with US crude prices only up around 2%, remaining in the same range. than last month and still recording a decline of 6% year-on-year. The price of gold rose even less.
Whether shipping rerouting fuels rising prices of other goods remains an open question, but it has yet to trickle down to overall market sentiment.
Even the U.S. consumer price inflation report for December, which was slightly positive, was quickly dismissed on Thursday. Annual headline and core inflation rates were slightly higher than expected, although core inflation fell below 4% for the first time since May 2021.
Far from arousing caution in the markets, bets on rate cuts by the Federal Reserve have accelerated. More than 150 basis points of declines this year have been priced into futures curves, the odds of a March decline have increased and two-year Treasury yields have fallen to their lowest level in l year, at 4.24%.
The decline in rates supported Wall Street stocks, which closed barely in the red, and pushed the dollar slightly lower. Futures are flat before markets open Friday.
With the weekly unemployment updates, it was not clear why the markets reacted in this way to an unpleasant CPI.
Although they have yet to respond to market easing bets, Fed officials have not seemed bothered enough by the CPI reading to change their current tone and some economists, such as Deutsche Bank, estimated that a significant surge in the CPI from housing prices is less problematic for the PCE inflation measures favored by the Fed.
“When we have weeks or months of data coming up, I don’t like to tie our hands,” Austan Goolsbee, the head of the Chicago Fed, told Archyde.com. “We don’t make decisions for March, June and others in January.
Whatever the real reason for markets’ stance, they will get a second glimpse of inflationary pressures later on Friday when a report on U.S. producer prices is released for the month of December which will probably be more moderate.
And whatever price pressures are still evident in the United States and other Western economies, there are none at all in China – consumer prices there fell for a third month in December while that producer prices extended their prolonged deflationary fall with an annual decline of surprising magnitude.
With Taiwan’s elections also due to take place on Saturday, Chinese stock markets remained in the gloom they have experienced for months and ended the week in the red.
The contrast with the Japanese Nikkei, which rose another 1.5% on Friday and has jumped more than 6% since the start of the year to reach its highest level since 1990, might not be more striking. .
On Wall Street, fourth-quarter earnings season looms on the horizon Friday.
US banking giants are expected to report a drop in fourth-quarter profits, following setting aside money to cover bad loans while paying depositors more.
Net interest income at the largest banks likely fell 10% on average in the fourth quarter, according to analysts at Goldman Sachs. An estimated 15% drop in trading revenue will also weigh on profits, they say.
But perhaps of most interest to the broader markets is the level of loan loss provisioning that is starting to emerge.
Key agenda items that might drive U.S. markets later on Thursday: * Minneapolis Federal Reserve President Neel Kashkari to deliver speech: JPMorgan, Citi, Bank of America, Wells Fargo, Bank of New York Mellon, BlackRock, UnitedHealth, Delta Airlines.
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