US Inflation Rise Shakes Global Markets
Higher-than-expected US inflation numbers have sent ripples across global [[markets]], impacting bond yields and currencies. This latest market analysis suggests the Federal Reserve might not cut interest rates as soon as previously thought.
Bond Yields Jump
Following the release of the US inflation report, Treasury yields climbed, causing a ripple effect globally. Australian and New Zealand yields also saw increases. The 10-year Treasury yield had its biggest one-day jump since December, highlighting market jitters.
Mixed Reactions in Stock Markets
The news led to mixed reactions in stock markets, with US equity futures, along with indexes for Japan and Hong Kong, showing slight gains after an initial dip. The S&P 500 fell slightly, while the Nasdaq 100 edged higher.
Oil, Gold, and Dollar Hold Steady
Oil prices stabilized after a previous drop, while gold continued its upward trend, nearing its recent record high. The dollar remained largely unchanged.
Key Inflation Takeaways
The US consumer price index rose 0.5% in January, more than what was expected. Core CPI, which doesn’t include food and energy, also saw a larger-than-anticipated increase of 0.4%. These January 2025 figures are fueling speculation that the Fed’s first rate cut might not happen until December, impacting market predictions.
Fed’s Response
Fed Chair Jerome Powell acknowledged the progress made on taming inflation but stressed there’s still work to be done. He emphasized the need to maintain a restrictive policy stance. Experts interpret this as a signal that the Fed might be less inclined to cut rates soon.
Global Impact and Future Outlook
This latest business news has led some analysts to believe that the next Fed move, even if it’s in late 2025 or early 2026, might be a rate hike rather than a cut. This “higher-for-longer” outlook warrants caution in the markets.
January Effect
Some economists suggest the surprising inflation jump was mainly due to seasonal adjustments at the start of the year, also known as the ‘January effect’. While the report caused some market anxiety, the overall trend towards the end of 2024 suggests a slightly cooler inflation picture.
Important Events This Week
Key economic data releases this week include Eurozone industrial production, US jobless claims, and PPI. Eurozone GDP and US retail sales data are expected on Friday. These updates will provide further insights into global economic trends.
Market Moves
The market reaction was evident in various asset classes. S&P 500 futures saw little change, while Hang Seng futures rose. The Australian dollar and other major currencies remained relatively stable. Bitcoin experienced minimal change, while Ether saw a slight increase.
