The Day Ahead in U.S. and Global Markets
Market Overview
Today is a crucial day for the markets, as they eagerly await the release of the U.S. consumer price inflation report for last month. Despite recent highs for Japanese stocks and U.S. regulators finally approving exchange traded funds to track bitcoin, all eyes are on this critical report.
Market Performance
Wall St has recovered its zest after a shaky start to the new year and is back in the black for the year to date. Bonds have also found their footing, with yields falling below 4% after a smooth auction of new notes late Wednesday.
Inflation Expectations
If consensus prevails, the CPI report should keep all happy, with ‘core’ inflation expected to have fallen below 4% for the first time since May 2021 – clocking 3.8% for December – even if annual base effects lift the headline a tick to 3.2%.
Fed Policy and Market Sentiment
Fed futures traders remain confident in penciling in more than 140 basis points of policy easing for the year, with more than two-quarter point cuts seen by mid-year. This has led to the dollar being on the back foot again. New York Fed chief John Williams certainly seemed to think it’s too much, too soon, saying late Wednesday that “our work is not done”.
Bitcoin ETF Approval
Excitement surrounds the approval of exchange traded funds to track bitcoin by U.S. regulators. The SEC approved 11 ETF applications, including from BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck. Industry focus now turns to the second largest cryptocurrency ether, which was up more than 4% on Thursday.
Stock Market Highlights
The Nikkei has outperformed the MSCI all-country index by 2% so far in 2024 and by 15% over 12 months. It’s now less than 10% from record highs hit at the height of the Japanese property bubble in 1990. Elsewhere, markets are braced for the tense weekend elections in Taiwan and the start of the U.S. earnings season with many of the big banks reporting on Friday.
Global Market Events
- U.S. Dec consumer price inflation report, weekly jobless claims, Dec Federal budget
- Richmond Federal Reserve President Thomas Barkin speaks
- U.S. Treasury auctions $21 billion of 30-year bonds, 4-week bills
- U.S. secretary of state Antony Blinken visits Egypt to meet Egyptian President Abdel Fattah al-Sisi