Yesterday’s inflation report from the US came as a relief to investors as the core PCE index showed a rise in monthly inflation but a slight easing in the yearly figure. Market expectations were met, calming fears of rampant inflation. This, combined with a soft jobless claims figure, helped boost stock markets such as the S&P 500, Nasdaq, and Russell 2000.
The US dollar also rebounded following the PCE print, with services inflation excluding housing and energy prices jumping 0.6% on the month, the highest since March 2022. The US Labor Department’s ‘super data’ users received an email hinting at a shift in underlying calculations contributing to the inflation increase, leading to speculation on prolonged elevated rent inflation affecting the Fed’s decisions.
Across the pond, European inflation figures were mixed, sparking anticipation that the European Central Bank (ECB) could cut rates ahead of the Fed due to weak economic outlooks. Markets are closely monitoring the potential for rate cuts in both regions, with the euro depreciating against the dollar based on underlying economic strength.
In Japan, policy debates continue, with the Bank of Japan (BoJ) board member’s positive comments countered by Governor Ueda’s cautious approach to rate adjustments. The USD/JPY’s movements reflect uncertainty, with traders wary of Japanese intervention to stabilize the yen. Meanwhile, China’s property market struggles persist despite stimulus efforts, highlighting deep-seated challenges in the economic sector.
On the other hand, India’s robust Q4 growth outperformed expectations, signaling a promising outlook for the emerging market. As China grapples with economic issues, India’s performance may position it as a strong contender on the global stage. Amid shifting landscapes in key economies, investors are navigating uncertainty but also seizing opportunities for growth and stability in different markets.
