Market Jitters Ahead of Key Inflation Data
As investors await crucial inflation figures, the dollar has surged for a fourth consecutive day, while Asian stocks have taken a hit. The upcoming data is expected to reveal a 0.2% increase in the overall consumer price index, marking the fourth month in a row, and a year-over-year acceleration for the first time since March.
Federal Reserve Interest-Rate Cuts in Jeopardy
Traders are now pricing in only two US rate cuts through June, down from almost four expected at the start of last week. This shift in sentiment is largely driven by anticipation of President-elect Donald Trump’s proposed tax and tariff policies, which are expected to drive up inflation.
Asian Stocks Slide
Stock benchmarks in Tokyo and Sydney have retreated, following the S&P 500’s decline after its biggest five-day advance in a year. The yen is nearing the closely watched level of 155, while Treasury 10-year yields remain little changed after surging 12 basis points on Tuesday.
Investors Position Ahead of Inflation Data
Market analysts warn that inflation may become a significant driver of markets once again, with the “genie not yet stuffed back into the bottle.” Chinese stocks slumped on Tuesday following reports that Trump is poised to pick two men with track records of harshly criticizing China for key posts in his administration.
Treasury Futures Indicate Further Losses
Open interest in the two-year note contract has risen for a fourth straight session, indicating that traders are betting on further losses in Treasuries. This is largely driven by anticipation that Trump’s planned policies will rekindle inflation and keep US interest rates high.
Fed Watchers Closely
Fed Minneapolis President Neel Kashkari has stated that he will be closely watching the inflation data to determine whether another interest-rate cut is appropriate at the US central bank’s December meeting. Meanwhile, fixed-income portfolio managers are warning that the bond market is set up for a stronger CPI number.
Commodities Steady
Oil has steadied near its lowest level this month, with the outlook for demand in focus after OPEC reduced its projections again on China’s slowdown. Gold remains little changed, while cryptocurrencies such as Bitcoin and Ether have seen slight declines.
Key Events This Week
Investors will be keeping a close eye on key events this week, including eurozone industrial production, US CPI, Fed speakers, eurozone GDP, US PPI, jobless claims, and Walt Disney earnings.
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