Spreadex Market Update
Equities Bounce Back Ahead of US CPI Today
After a shaky European open yesterday, markets appeared to bounce back throughout the day as the US Dollar softened. Initial jitters over today’s US CPI report look to have faded for now with equities remaining buoyant today and USD still in the red. Today’s release has the potential to create fireworks, however, if a fresh spike in inflation is seen. The market is looking for headline inflation to rebound to 0.5% m/m from the prior -0.1% reading. However, annual inflation is forecast to soften again to 6.2% from 6.5% prior. Any upside beat on that reading would likely be the main catalyst for volatility today, driving USD higher on hawkish Fed expectations while pulling risk assets down.
Key Factors for Today
- USD softer ahead of US CPI data – Fed speakers due also
- Markets bounce back from weak start on Monday
- US earnings continues today – Coca Cola & Airbnb due
- CHF rally continues
- Japanese government confirms new BOJ selection
- Metals and oil stable ahead of US CPI
Coming Up
- EUR – Flash GDP q/q
- USD – CPI m/m & y/y
- USD – Fed’s Logan, Harker & Williams speak
Equities Traders Brace for US CPI
Equities markets were broadly higher yesterday headlined by the FTSE breaking out to fresh record highs. A weaker US Dollar helped underpin risk sentiment. The continued fall in natural gas prices was a big boost for stock sentiment, particularly in Europe. Ahead of the keenly awaited UK CPI reading tomorrow today’s UK labour data saw wage growth dropping back to 5.9% from 6.4% prior while the unemployment rate held steady, an encouraging sign for a softer inflation reading tomorrow which should help drive FTSE higher still if seen.
Coca Cola & Airbnb Due to Report Today
In the US, earnings season gets back underway today with Coca Cola and Airbnb both due to report. Both companies are set to record lower earnings and revenues from the prior quarter. However, on the back of yesterday’s broad stock rally, any upside or encouraging data today should help drive prices higher, provided there are now nasty upside surprises with US inflation.
CHF Rallies On – New BOJ Pick Confirmed – UK Wages Fall
CHF remains the strongest performer across the European open on Tuesday. A hot CPI reading yesterday has resharpened traders’ hawkish SNB expectations. A weaker USD this morning has also helped underpin EUR and GBP. In the UK, the latest labour market data today showed wage growth cooling ahead of tomorrow’s UK CPI reading. In Japan, Kazuo Ueda has been confirmed by the Japanese government as its pick to take over the BOJ in April as Kuroda steps down. Ueda has previously warned of the dangers of premature interest rate hikes, with JPY softening a little in response to news of his selection.
Metals & Oil Stable Ahead of US CPI
In the metals and commodities space, both gold and silver are a little firmer today ahead of the much-awaited US inflation reading. Any upside strength in USD, however, will likely see both metals lower given the weaker action we saw yesterday. Crude prices are looking a little firmer today also following a weaker showing yesterday as markets mulled recession fears and a weaker demand outlook for oil.
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