The upcoming report will set fresh direction for markets in the near term
US stocks were mostly lower on Monday as the recent rally continued to cool after posting fresh record highs. Also, investors were cautious in anticipation of this week’s consumer and producer price data, which could shed more light on whether the Federal Reserve can begin cutting interest rates in June. Against this backdrop, the S&P 500 slipped 0.11% and the Nasdaq Composite gave up 0.41%, with both indexes seeing their second negative session in a row. Bucking the trend, the Dow Jones added 0.12%
In Asia, equities were relatively steady on Tuesday, with investors focusing on the upcoming US inflation report that will set fresh direction for markets. Japan’s Nikkei 225 lost 0.05%, extending its retreat from record highs amid building expectations that the central bank will raise its interest rate next month. Chinese markets were mixed, with Hong Kong’s Hang Seng up 3%, while the Shanghai Composite index slipped 0.4%. Elsewhere in the region, the S&P/ASX 200 edged 0.11% higher, while South Korea’s Kospi advanced 0.83%.
European stocks saw a higher open today as sentiment has improved somehow, with the overall risk sentiment looking more optimistic now. On the data front, UK wage growth was 6.1% in December. According to markets, the release is unlikely to derail expectations for the Bank of England to begin cutting interest rates around June. US stock index futures have settled in positive territory after yesterday’s modest dip.
Meanwhile, the US dollar retains a modest bullish bias since Monday, cautiously recovering from mid-January lows seen around 102.35. The USD index still lacks the momentum to challenge the 103.00 figure that represents the immediate upside target for bulls ahead of a key CPI report that will set a short-term tone surrounding the greenback through Fed rate cut expectations. In a wider picture, the dollar remains bearish, staying on the defensive for nearly a month already. Should inflation surprise to the upside, the USD index may bounce across the board.