Asia takes a back seat as investors worldwide brace for potential market turbulence amid a quiet Monday with key Asian centers, including China and Japan, observing holidays. The looming specter of US inflation becomes more pronounced, with a focus on the upcoming consumer price report for January, which could influence the Federal Reserve’s decision on potential rate cuts in March or May.
As Lunar New Year celebrations extend to New York State, US stock futures remain largely unchanged. The market sentiment appears cautious, anticipating the release of the Headline Consumer Price Index (CPI) forecasted to rise 0.2% month-on-month. The report may refine speculations on Federal Reserve’s monetary policy adjustments.
Analysts predict a return of the annual CPI to 3.0%, with core slowing to 3.8%. Notably, used car prices are expected to contribute significantly to the inflationary pressure. The market, which had previously indicated a higher likelihood of a March rate cut, now shifts its expectations to an 80% chance of easing in May.
With at least eight Federal Reserve speakers scheduled for the week, including Governor Christopher Waller, investors are keenly watching for insights into the central bank’s stance. Additionally, US retail sales data and Britain’s CPI data and Q4 GDP reading add to the mix of economic indicators that could sway market sentiments.
Beyond economic indicators, the soaring prices of cocoa, driven by poor harvests in key regions and exacerbated by the El Nino weather pattern, pose concerns. A 16% jump in cocoa prices last week, leading to record highs, is not only a harbinger for chocolate lovers but also raises questions about the potential long-term effects of global warming on commodity markets.
Investors are also eyeing corporate earnings reports, with companies like Kraft Heinz, Coca Cola, and Restaurant Brands set to reveal results. The focus will be on how rising costs and potential margin compression impact the bottom line.
As central bank leaders, including BoE Governor Bailey and ECB Chief Economist Lane, share their perspectives, Monday unfolds with a mix of economic data and influential speeches that could shape market trends in the days to come.
