Stocks hold onto gains ahead of US inflation test

  • Global stocks rise an inch; dollar close to 7-month lows
  • Yen gains on BOJ report to examine effects of policies
  • Eyes on the US CPI due at 13:30 GMT
  • Eurozone Treasuries and bonds contribute to gains

MILAN, Jan 12 (Reuters) – Global stocks held up modest gains on Thursday on cautious optimism that U.S. data will confirm inflation is easing, while the yen rose on a report Japan will review this month- here are the side effects of his ultra-easy politics.

An MSCI gauge of global stocks (.MIWD00000PUS) rose 0.2% to a four-week high at 08:31 GMT ahead of core US consumer price inflation (USCPFY=ECI) which is expected to have slowed to an annual rate of 5.7% in December, from 6% a month earlier. Overall inflation from one month to the next is zero (USCPI=ECI).

Bonds held on to gains, also reflecting hopes of weaker inflation printing, and the US dollar was near a seven-month low against a basket of currencies. The benchmark European STOXX 600 equity index (.STOXX) rose 0.4% to its highest level since April 2022.

Data due at 13:30 GMT is expected to have a big impact on markets by shaping expectations about the speed of interest rate hikes in the world’s largest economy. Markets estimated the Federal Reserve was more likely to raise rates by 25 basis points, rather than 50, at the February meeting.

“The worst and best days for the S&P 500 in 2022 have come on the days of a CPI release. As such, it is inevitable that today’s US CPI will have the ability to shape the next month,” Deutsche Bank strategist Jim Reid wrote.

“The latest releases saw two CPI downside surprises in a row for the first time since the pandemic, raising growing hopes that the Fed may finally pull off a soft landing,” he said. -he adds.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.1% after hitting a seven-month high, while the Japanese Nikkei (.N225) was flat.

S&P 500 futures were broadly flat following gains in Wall Street indices on Wednesday. Federal Reserve Bank of Boston chief Susan Collins told The New York Times she was leaning toward a 25 basis point hike.

Optimism for a more favorable rate outlook and a pick-up in demand as China emerges from strict COVID-related restrictions kept oil prices near week-long highs.

Brent crude futures rose above $83 on Thursday before falling slightly to trade flat on the day at 82.67 a barrel.

US Treasuries added a little to Wednesday’s gains, sending benchmark 10-year yields down 4.4 basis points (bps) to 3.514%. German 10-year rates, the benchmark for the eurozone, fell 7 basis points to 3.509%.

CHINA HOPE

Along with hoping for softer Western central banks, investors are also betting on a recovery in China to support global growth and eye a potential policy shift in Japan.

The Bank of Japan surprised markets last month by widening the range around its 10-year bond yield target, a move that triggered a sudden rise in yields and a surge in the yen.

Thursday. Japanese newspaper Yomiuri has reported that the BOJ will consider the side effects of Japan’s super-easy settings earlier than expected – in policy meetings next week – and may take additional steps to correct curve distortions. rates.

The yen rose 0.9% and was last at 131.75 to the dollar. Ten-year Japanese government bond futures fell to near eight-year lows.

Currency markets elsewhere held their breath ahead of the US CPI data while China’s reopening kept supply under Asian currencies. The dollar index added 0.1% to 103.23, not far from a seven-month low of 102.93 hit this week. The yuan traded near five-month highs at 6.7555 to the dollar.

On Thursday, China reported lower consumer prices in December and a bigger-than-expected decline in ex-factory prices – underscoring weak demand – as investors bet on a recovery in the coming months.

“It’s not enough for China to come out of COVID to really turn around the whole global economy,” said Steven Wieting, chief investment strategist and chief economist at Citi Global Wealth Investments. “But it really weighs in the opposite direction.”

Reporting by Danilo Masoni in Milan and Tom Westbrook in Singapore

Our standards: The Thomson Reuters Trust Principles.

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