The US inflation suggests that interest rate cuts by the Fed may be slower to come
US stocks closed little changed overnight after December’s CPI report came out slightly higher than expected. The release reflected a 0.3% increase in consumer prices for the month, pushing the annual rate to 3.4% versus 0.2% and 3.2% expected. At the same time, core CPI, excluding volatile food and energy prices, came in line with expectations. Even as the data suggests that interest rate cuts by the Fed may be slower to come, equities refraned from a plunge during the session. The Nasdaq Composite closed at the flat line, the Dow Jones gained just 0.04%, and the S&P 500 edged lower by 0.07%.
Similarly, most Asian stocks were range bound on Friday, as investors digested mixed data out of China. Beijing reported that its exports and imports rose last month, while consumer prices fell 0.3% in December, the third consecutive month of declines. The producer price index fell 2.7% in the 15th straight month of declines. The Shanghai Composite index slipped 0.16%, and the Hang Seng in Hong Kong gave up early gains, falling 0.53%. In Japan, the Nikkei 225 rallied 1.5% to a new 34-year high after weak data on the country’s current account added to expectations of an ultra-dovish Bank of Japan.
In Europe, equities opened higher ahead of the weekend as investors cheered upbeat economic data out of the UK. Britain’s economy grew rose 0.3% in November, beating forecasts for a 0.2% expansion. Industrial and manufacturing production both expanded in November. The Stoxx 600 was 0.9% higher in early deals, with all sectors holding in positive territory. US stock index futures were slightly higher in early pre-market deals, suggesting risk sentiment could improve during the regular session.
Meanwhile, the US dollar bounced slightly after volatile trading on Thursday. In a knee-jerk reaction to the inflation report, the USD index briefly rallied to the 102.75 zone before retreating back into negative territory. The greenback keeps holding above the 102.00 figure, struggling to attract more sustained demand at this stage. Should the dollar fail to regain the 102.50 zone today, this would mark negative weekly close after last week’s gains. The key upside target now arrives around 103.00.