US CPI, Bank Earnings in Focus as Markets Hold Steady

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Global markets remained largely unchanged on Wednesday as investors awaited U.S. consumer price data, which could potentially alter the outlook for monetary policy, while also anticipating whether major banks' earnings would meet high expectations.

U.S. equity futures were mostly flat in Asia, with Pan-European STOXX 50 futures rising 0.1% and UK FTSE futures up by 0.2%, ahead of the British consumer inflation report, which could trigger a fresh round of selling in gilts. In Asia, MSCI's index for Asia-Pacific shares outside Japan dropped 0.2%, and Japan's Nikkei fluctuated, ending 0.3% lower.

The Japanese yen and yields were the key market movers. The U.S. dollar fell 0.4% to 157.3 yen, as markets now anticipate a 70% chance that the Bank of Japan will raise interest rates in January after Governor Kazuo Ueda hinted at such a possibility next week. Ten-year Japanese government bond yields reached 1.255%, their highest since 2011.

Much attention was on the U.S. CPI data, set to be released later Wednesday. The consensus forecast expects a modest 0.2% rise in the core measure, though there is a risk of a stronger reading. A 0.3% increase or more could reignite the selling in global stocks and bonds.

"This CPI print is a key turning point," said JPMorgan analysts in a client note. "A dovish outcome could fuel a rally, especially if earnings come in strong, while a hawkish reading might push the 10-year yield towards 5%, raising volatility across asset classes and pressuring equities."

U.S. producer price data for December, which was surprisingly mild, tempered the U.S. dollar and helped pull short-term Treasury yields lower. The S&P 500 closed up 0.1%. However, futures still expect a modest 29 basis points of easing from the Federal Reserve this year, with rate cuts not fully priced in until September. Despite the drop in yields initially following the PPI data, the 10-year Treasury yield bounced back and ended the day slightly lower at 4.809%.

Investors were also preparing for fourth-quarter earnings reports from major U.S. banks, including Citi and JPMorgan, which are expected to show stronger profits due to robust dealmaking and trading.

In Europe, the focus remained on the UK, where concerns about the fiscal outlook had driven government bond yields to 16-year lows. The UK consumer inflation report, due later, is expected to show that headline inflation held steady at 2.6% in December.

The British pound dropped 0.1% to $1.2198, just above a one-year low of $1.2099.

In commodities, oil prices were higher after falling more than 1% on Tuesday. U.S. crude rose 0.5% to $77.92 per barrel, while Brent gained 0.4% to $80.21.

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.