A look at the day ahead in European and global markets from
Anshuman Daga
It was billed as one of the most important data points for
makets that were desperate for signs on whether U.S. inflation
is steadily retreating.
While U.S. consumer prices stuck to the consensus
expectation on a monthly basis, heating up to 0.5% from
December's 0.1%, largely due to rising energy prices, the CPI
increased more than expected in the 12 months through January.
The annual rise was however the smallest since late 2021.
That sent the S&P down but the Nasdaq index ended up, while
two-year Treasury yields rose to 3.799, the highest since
January.
It looks like markets are still unable to make up their
minds on the data's long-term impact.
The drumrolls from the Fed continued. Officials said the
U.S. central bank would need to keep gradually raising interest
rates to beat inflation.
After the inflation data, traders of interest rate futures
now see the Fed raising borrowing costs three more times,
bringing the policy rate to the 5.25%-5.50% range by July, if
not June.
Today, January's inflation report from Britain is set to
show year-on-year double-digit price increases, underlying why
the country will see more interest rate rises despite being the
only G7 economy that the IMF expects to shrink this year.
European stocks, which flirted with a near one-year peak on
Tuesday before ending flat, are expected to open lower as Euro
Stoxx 50 futures declined. U.S. futures also edged down.
The Bank of England has had to raise borrowing costs even
though the economy has struggled, after a post-pandemic boost
faltered amid the country's cost-of-living crisis.
While basic pay in Britain grew more quickly again in the
last three months of 2022, retail sales in December - when
people are likely to splurge - declined by the most for that
month in at least 25 years.
The Financial Times reported on Tuesday that British Prime
Minister Rishi Sunak and Finance Minister Jeremy Hunt are
considering a deal to end a wave of strikes among public sector
workers that would backdate next year's pay rise.
Meanwhile, investors turned more optimistic about the global
economy in February, flocking to emerging market stocks and
cutting their cash holdings to levels last seen before the war
in Ukraine, a BofA survey of global investors showed on Tuesday.
OPEC raised its 2023 global oil demand growth forecast, its
first upward revision in months, as China relaxed its COVID-19
curbs, and pointed to a tighter market.
President Joe Biden picked Federal Reserve Vice Chair Lael
Brainard and White House economist Jared Bernstein to lead his
economic team, part of a fresh push by the Democratic president
to convince sceptical Americans that his economic policies are
working.
Key developments that could influence markets on Wednesday:
European economic data: UK Jan CPI
U.S. economic data: Retail sales
U.S. results: Cisco, Kraft Heinz
Speakers: ECB President Christine Lagarde takes part in a
plenary debate on the ECB Annual Report 2022 in parliament
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Prices rise in January BofA chart on peak rates from fund manager survey ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Anshuman Daga; Editing by Edmund Klamann)
