General Market Analysis 13/02/2024

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Markets Steady Ahead of Key Inflation Data

Global financial markets had a relatively quiet day yesterday as many markets in Asia were closed for the Lunar New Year and investors looked ahead to key inflation data in the US today. The three major US indices were relatively quiet, the Nasdaq and S&P dropping off recent historic highs, albeit by small amounts, 0.3% and 0.09% down respectively and the Dow adding just 0.32%. The dollar was close to flat against most of the majors and US treasury yields ticked slightly lower, the rate sensitive 2-year dropping 2 basis points to 4.468% and the benchmark 10-year declining 1.9 basis points to 4.168%. Oil was also very quiet compared to recent days, Brent losing just 0.2% to trade down to $82.00 a barrel and WTI losing 0.1%, now trading around $76.92 a barrel. Gold took another step lower and once again bounced off support near $2,010 to close the day just under the $2,020 mark.

CPI Date in Focus for Traders Today

There is no doubt that the major focus for investors for the early part of this week’s trading is the key US CPI data that is due out later today, yesterday’s moribund trading conditions were testimony to that, and traders are expecting more rangebound conditions ahead of tonight’s key data print. Expectations are for the Core month-on-month number to show an increase of 0.3% and for the CPI number (including Food and Energy) to have a 0.2% increase, with the year-on-year number to slip below 3% for the first time since March 2021. Any variation could lead to a huge increase in volatility in the market with rate cut expectations primary in most investors thinking, anything lower than expected pushes a May cut into stark reality and will allow the ‘perfect storm’ scenario for US stocks to push further into new territory. However, a stronger print could have the opposite effect and see some sharp corrections in equities as well as a step higher for the greenback.

Asian Markets Back in Action Ahead of US Data

Many of the Asian markets that were closed yesterday for Lunar New Year celebrations are back in action again with the notable exception of China which has the whole week off. The initial focus will once again be on the land of the long white cloud with the Inflation Expectations data due out in New Zealand midway through the day. The European session see’s the first of four major UK data releases of the week with employment data out shortly after the London open, the focus then moves to Switzerland where the key CPI data is due out, expectations are for an increase of 0.6% m/m. The main event of the day, however, comes in the New York session with the release of the latest CPI data out of the US with traders expecting to see a sharp pick up in volatility whatever the outcome.