Europe looks up ahead of US inflation

By Claude Chenjou

PARIS (Reuters) – Europe’s main stock markets are expected to open higher on Thursday on the prospect of a slowdown in U.S. inflation, which could offset a prolonged scenario of monetary tightening.

Index futures suggest gains of 0.33% for the CAC 40 in Paris, 0.31% for the Dax in Frankfurt, 0.29% for the FTSE 100 in London and around 0.30% for the EuroStoxx 50.

The main meeting of the week, monthly data on US consumer prices, will be published at 13:30 GMT. A Reuters consensus forecast price increases to slow to 6.5% year-on-year in December, after still rising 7.1% year-on-year from the previous month.

If the slowdown in inflation is confirmed, it could support the scenario of an increase in interest rates by two officials of the institution, Mary Daly and Rafael Bostic, at the end of the meeting of the American Federal Reserve System (FED) on February 1. , this week argued for a loan cost above 5% for the long term.

Markets are currently pricing in a 77% chance of a 25 basis point Fed rate hike to 4.92% in June from 4.25%-4.50%.

“(It’s) a CPI number that could help settle the debate for the February meeting,” said Jan Nevruzzi, rates strategist at NatWest Markets.

“We expect a lower-than-consensus figure for CPI, which, if confirmed, could push the (stock market) rally higher,” he said.

ON WALL STREET

The New York Stock Exchange ended higher on Wednesday as investors remained optimistic ahead of the release of inflation data.

The Dow Jones Industrial Average rose 0.80 percent, or 268.91 points, to 33,973.01.

The broader S&P-500 rose 50.36 points, or 1.28%, to 3,969.61.

The Nasdaq Composite rose 189.04 points (1.76%) to 10,931.67.

Major sectors of the S&P-500 ended largely in the green, particularly the day’s best performer, real estate.

High-growth stocks including Microsoft and Amazon contributed significantly to the S&P-500’s gains.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index rose 0.01% to 26,449.82 points, while the larger Topix rose 0.36% to 1,908.18 points.

The Bank of Japan (BoJ) offered a more optimistic view of the country’s economic health on Thursday, saying a growing number of companies are planning wage increases and the archipelago is on track to meet its 2% inflation target.

In China, the Shanghai SSE Composite gained 0.05%, and the CSI 300 gained 0.2%.

China’s consumer price index (CPI) rose 1.8% year-on-year in December amid rising food prices and despite falling domestic demand and a slowing economy. Economic activity, according to data from the National Bureau of Statistics (BNS) announced Thursday.

RATE

The yield on the 10-year Treasury note fell nearly two basis points to 3.53% after falling more than eight basis points a day earlier.

In Europe, the ten-year German Bund, which fell almost 12 basis points on Wednesday, was steady at 2.17% on Thursday despite calls from European Central Bank (ECB) officials such as Olli Rehn for a further hike. increase in institution rates.

CHANGES

The dollar was virtually flat (-0.01%) against a basket of six international currencies ahead of the release of US inflation figures.

The euro is trading at $1.0759 (+0.04%), near a seven-month high against the greenback.

The Japanese currency rose 0.57% to ¥131.71 as the Yomiuri daily BoJ will consider the side effects of accommodative monetary policy at its scheduled meeting next week and may take further steps to flatten the yield curve. distortions.

OIL

Oil prices, which rose sharply on Wednesday, firmed further on Thursday on hopes that demand in China would pick up again. According to China’s Ministry of Industry and Information Technology, industrial production is expected to grow by 3.6% in 2022 compared to the previous year, despite anti-COVID-19 restrictions.

“There is continued optimism in the oil market, supported by China’s reopening, and increased travel should support gasoline demand as the Chinese New Year approaches,” notes Vortexa analyst Serena Huang.

Brent rose 0.08% to $82.74 a barrel, US light crude oil (West Texas Intermediate, WTI) rose 0.05% to $77.45.

(Writing by Claude Chendjou, Editing by Kate Entringer)

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