Global Markets Breathe a Sigh of Relief, But Caution Remains
As the earnings season kicks off, global stocks and non-dollar currencies have found some respite from inflation-related anxieties. A softish U.S. core inflation reading has revived hopes for Fed rate cuts this year, leading to a relief rally. However, this optimism may be short-lived, as U.S. inflation still looks a bit too warm for comfort.
Luxury Firms Pin Hopes on U.S. Consumers
Cartier-owner Richemont’s sales report on Thursday will be the main event during European hours, providing the first insight into the health of high-end demand. Luxury firms are counting on U.S. consumers to drive growth, despite weakness persisting in China.
Middle East Tensions Simmer
Investors will keep a wary eye on developments in the Middle East, following Israel’s intensified strikes on Gaza hours after a ceasefire and hostage release deal was announced. The region’s instability could impact global markets.
U.S. Core Inflation: A Mixed Bag
While the just-about-soft U.S. core inflation figure for December lifted sentiment, analysts caution that the annual rate of 3.2% is still a bit on the high side. The Fed is likely to stay on hold for a while longer, keeping interest rates steady.
Banking on Confidence
Strong earnings from U.S. banks Goldman Sachs, JPMorgan Chase, Wells Fargo, and Citigroup have boosted sentiment. Wall Street CEOs voiced confidence that the incoming U.S. administration would be business-friendly and good for banks. Bank of America and Morgan Stanley will report results on Thursday.
Chip Demand in Focus
European chipmakers may take cues from an earnings report by Taiwan Semiconductor Manufacturing Co, which showed profits broadly met estimates. TSMC, whose customers include Apple and Nvidia, is closely watched for indications of AI-related chip demand.
Yen Surges on BOJ Comments
The yen was the biggest mover in the currency market on Thursday, surging to a one-month high in Asian hours following comments by Bank of Japan Governor Kazuo Ueda. An overwhelming majority of economists expect the BOJ to raise interest rates at one of the two meetings this quarter.
Trump’s Inauguration Speech in Focus
Donald Trump’s inauguration speech will be a focus for politicians and policymakers across the world to gauge his likely policy steps. Analysts expect Trump’s actions to boost growth but add to inflationary pressures, keeping the dollar well-supported.
South Korea’s Central Bank Holds Steady
South Korea’s central bank unexpectedly left its policy interest rate unchanged and signalled it needs to wait for the domestic political turmoil weighing on the currency to stabilise before it can make further rate cuts.
Key Developments to Watch
- Germany inflation data for Dec
- UK GDP estimate for Nov
- Euro zone trade balance for Nov
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