The global actions are trading higher on Wednesday, but the trend is for cautious trading ahead of US consumer price data that could change expectations for US monetary policy, while investors waited to see if the profits of the big US banks They would meet expectations, which are very high.
The bond market received some relief from the recent sell-off, as Treasury yields fell slightly and Treasury yields fell slightly. German 10-year bonds They broke their second-longest streak of price losses in more than 40 years.
Wall Street futures rose between 0.2% and 0.3%. In Europe, where the regional index STOXX 600 up 0.7% on the day, driven mainly by gains from rate-sensitive UK housebuilders following data showing an unexpected slowdown in British inflation.
BlackRock (BLK.N), the world’s largest fund manager, was one of the first major financial companies to report earnings on Wednesday. The company said assets under management hit a record $11.6 trillion in the fourth quarter.
U.S. bank BNY (BK.N) reported a rise in fourth-quarter earnings ahead of big rivals JP Morgan (JPM.N) and Citigroup (CN), ahead of the opening bell and consumer inflation numbers. that could inform expectations about what the Federal Reserve might do with interest rates this year.
Marc Ostwald, global chief economist at ADM Investor Services, said the Federal Reserve’s “Beige Book” for December, which compiles anecdotal evidence of conditions across the Fed’s 12 districts, reported an increase in economic activity. , but with the expectation that price pressures will persist.
“Given the strength of the latest jobs data and the expected strength in activity data this week, the data is likely to reinforce the Fed’s resolve to pause its rate cutting cycle,” he said. Right now, the swaps market shows that traders believe only one rate cut is likely this year, with a second quarter-point reduction being a more remote possibility as only $31.4 is discounted. basic flexibility points. This was close to 45 basis points a week ago, before the December jobs report showed strong job growth.
pivot point
For the CPI report, forecasts focus on a small 0.2% increase in the underlying measure, with risks skewed to the upside. A strong reading of 0.3% or more could see selling in global stocks and bonds resume. “This CPI report is a pivot point.
A dovish reading would likely rekindle the rally, which would likely be fueled by a strong period of earnings,” JP Morgan analysts said in a note to clients. “A hawkish reading could see the 10-year bond yield try reach 5%, increasing volatility across all asset classes and continuing to pressure equities.”
Overnight, US producer price data for December was surprisingly subdued, with the underlying measure unchanged for the month. This dampened the US dollar and reduced short-term Treasury yields from their highs. The benchmark US 10-year yield fell 2 basis points to 4.768%, after hitting a 14-month high near 4.8% earlier this week. Benchmark yields in Europe also fell slightly. German 10-year bond yields fell 2 basis points to 2.6%, after rising for 10 consecutive days at the close on Tuesday, the longest streak of increases since February 22, which at 11 days was the longest since a 13-day streak of increases in May 1981, according to LSEG data.
Yields on UK government bonds, or gilts, fell more drasticallywith the 10-year yield down 8.1 basis points to 4.808%, after data showed British inflation rose less than expected in December.
Gilts have been at the center of this month’s bond sell-off, pushing long-term yields to their highest levels since the late 1990s due to concerns about the British government’s finances.
In currency markets, sterling was almost unchanged on the day at $1.223, while the Japanese yen was one of the strongest assets. The dollar fell 0.66% to 156.93 yen, as markets now see a 70% chance that the Bank of Japan will raise interest rates in January, after Governor Kazuo Ueda said those responsible of monetary policy would discuss that option next week. In commodities, oil prices stabilized around $80 a barrel after a 1% drop on Tuesday.
Source: Ambito
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