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16.01.2025 11:39 AM
Global stocks rose on Thursday, while the U.S. dollar weakened as U.S. core inflation eased, raising expectations for more easing by the Federal Reserve. Meanwhile, the yen hit a one-month high on speculation that the Bank of Japan could decide to hike rates next week.
European stock futures point to a muted start to the trading day. This comes after the STOXX 600 index of leading European stocks posted its best daily gain in four months on Wednesday, with STOXX 50 and FTSE 100 futures up 0.3%, the data showed.
Luxury and tech sectors were in particular focus in Europe, with stocks such as Cartier brand owner Richemont and AI chip maker Taiwan Semiconductor Manufacturing Co buoyed by strong earnings.
US stocks posted their biggest daily gains since early November on Wednesday, driven by strong quarterly earnings from major financial players JPMorgan, BlackRock and Goldman Sachs. Their results boosted investor confidence in the resilience of the US economy.
Asian stocks also followed Wall Street's gains, with MSCI's broadest index of Asia-Pacific shares excluding Japan rising 1.2%. This growth confirms the positive sentiment in global markets despite the remaining macroeconomic risks.
Global markets are awaiting further actions from central banks. The Federal Reserve's rate decision, as well as possible changes in the Bank of Japan's policy, are in the spotlight. These events could significantly affect the dynamics of currency and stock markets in the coming days.
Stock markets and other risk assets rose confidently amid positive inflation data in the US. According to the report published in December, the consumer price index increased by 2.9% year-on-year, which completely coincided with forecasts. Core inflation, which excludes volatile food and energy prices, rose by 3.2%, which was slightly below the expected 3.3%. This gave the markets reason for optimism.
Investors were particularly enthusiastic not only about the inflation figures, but also about the producer price report published earlier. According to this document, producer price growth in December was moderate, which strengthened the view that the economy could stabilize.
These data increased traders' confidence that the Federal Reserve System (Fed) could cut interest rates twice by the end of this year. Such a scenario would be especially favorable for financial markets, which was immediately reflected in the sentiment of traders.
In the currency markets, the dollar weakened against most other currencies. The dollar index, which reflects its value against six major currencies, amounted to 109.07. This decline was a natural response to expectations of monetary easing.
Eric Robertsen, global head of research and chief strategist at Standard Chartered, expressed cautious optimism about the prospects for the US economy in his speech at a roundtable in Singapore.
"We expect a moderate rate-cutting cycle from the Federal Open Market Committee (FOMC), but we believe that too much short-term aggressiveness could hurt markets," Robertsen said.
He also stressed that while the dollar may strengthen in the long term, the path to that will be turbulent. The key challenges could be a slowdown in economic growth in other regions caused by the introduction of new tariffs.
Data on slowing inflation and easing of the Fed's monetary policy have a significant impact not only on US markets, but also on global markets. If rate-cutting expectations come true, it will signal growth for many economies that rely on US exports.
As investors continue to evaluate new data and forecasts, the focus remains on the Fed's actions, which could shape market dynamics for months to come.
Investors are closely watching the future policies of Donald Trump, who officially returns to the White House on Monday. Recent media reports that tariffs may be introduced more gradually than expected have eased some of the tension in the markets.
Experts predict that the Trump administration's actions may stimulate economic growth, but at the same time increase inflationary pressures. The central event that will attract the attention of not only analysts but also politicians is Trump's inauguration speech on January 20. It may be the key to understanding his future strategy in the field of domestic and foreign policy.
On currency markets, the yen demonstrated strengthening, reaching a nearly one-month high. This growth was the result of expectations that the Bank of Japan may revise its rates at the upcoming meeting. The probability of an increase, according to traders, has already exceeded 70%.
However, analysts remain cautious. Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, said:
"We expect the traditionally low-key BOJ Governor Kazuo Ueda to wait until March for confirmation of solid wage growth and clarity on US trade policy. However, a hike as early as next week cannot be ruled out."
The yen was last trading at 156.22 per dollar. The euro was little changed at $1.0285, while sterling was down slightly, down 0.24% at $1.2215.
The US Treasury market responded by lowering yields after the inflation data. The 10-year yield fell 13.5 basis points to 4.653%. It was at 4.655% when last updated.
Central bank and policy decisions will remain the main drivers of market movements in the coming days. Investors are hoping for more clarity on Trump's intentions and further signals from the Bank of Japan. Developments in these areas could significantly impact sentiment and dynamics in global financial markets.
Oil prices edged up slightly, helped by an unexpectedly large draw in U.S. crude inventories. This factor has increased concerns about possible supply disruptions related to new U.S. sanctions against Russian energy trade.
The latest data on the decline in oil inventories was higher than expected, pushing prices higher. These developments are accompanied by increased geopolitical tensions related to new restrictions on Russian oil exports. Analysts warn that risks to supplies could cause further volatility in commodity prices.
In the precious metals market, gold hit a one-month high, rising to $2,702.09 per ounce in Asian hours. This rise is associated with a change in expectations about the future policy of the Federal Reserve. Hopes for a cut in US interest rates have fueled demand for safe-haven assets, including gold.
Global stocks and non-dollar currencies have temporarily found support thanks to soft US core inflation data and a strong start to the earnings season. These factors have eased investors' fears related to inflation pressures and have again raised questions about a possible easing of monetary policy by the Federal Reserve.
However, analysts warn that the euphoria may not last long. Despite optimistic expectations, inflation in the US remains at a worrying level. If the new Trump administration takes tough measures in the area of tariffs and taxes, inflation pressures may increase.
European markets are eagerly awaiting sales data from Cartier owner Richemont on Thursday. The report will provide an early indication of how the luxury goods market is faring, especially amid weak demand in China. For luxury companies, US consumers remain a key hope for recovery.
Markets remain on the lookout for key events, including Fed decisions and geopolitical developments. The energy sector continues to be impacted by sanctions and stock fluctuations, while gold and equities are reacting to macroeconomic developments. These factors will shape global financial and commodity markets in the coming days.
Despite the fact that December's US core inflation data came in slightly softer than expected, analysts warn that the annual rate of 3.2% is still at a level that requires careful attention. The Federal Reserve is likely to keep the current rate in the near term to minimize the risk of overheating the economy.
The positive sentiment in the market was supported by strong financial results from the largest US banks, including Goldman Sachs, JPMorgan Chase, Wells Fargo and Citigroup. Bank executives expressed optimism about the new administration's policies, emphasizing their positive impact on the business environment.
Meanwhile, investors are eagerly awaiting the release of earnings reports from Bank of America and Morgan Stanley, scheduled for Thursday. The results of these giants will help clarify the overall health of the financial sector and its prospects.
European chipmakers such as ASML and Infineon could benefit from solid financials from Taiwan Semiconductor Manufacturing Co. TSMC, whose main clients include giants such as Apple and Nvidia, delivered results in line with expectations. Of particular interest is demand for AI chips, which remains a growth driver for the industry.
Expectations for a rate hike by the Bank of Japan continue to rise. According to surveys, the vast majority of economists expect a rate change as early as the first quarter of this year, with many believing a decision could be made in January. This adds volatility to currency markets, where the Japanese yen has been steadily rising.
Scott Bessent, the nominee for Treasury Secretary, outlined his vision for the development of the American economy. Testifying before the Senate Finance Committee, he emphasized that maintaining the dollar as the world's reserve currency is a priority. Bessent outlined an ambitious plan to achieve a "new golden age of economics" that could give a strong boost to the US financial system and its influence on the global stage.
Future Guidance
Markets continue to react to macroeconomic data and statements from key figures shaping global economic policy. Inflation, the Fed's monetary policy decisions, the Bank of Japan's strategy and the prospects for the US economy under the new administration remain the main themes influencing investor sentiment.
The surprise decision by the South Korean central bank to keep its interest rate unchanged sent a strong signal to markets. The bank said it needed to wait for the domestic political situation, which has been putting pressure on the national currency, to stabilize before taking further rate cuts.
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