Global Markets React to US Inflation Data

Global markets experienced mixed reactions to key economic data releases and geopolitical developments, with European equity futures tracking a decline on Wall Street. This comes after hotter-than-expected US inflation data raised doubts about an imminent interest rate cut by the Federal Reserve.

However, there was better news for UK traders as inflation in Britain came in lower than forecast in January, alleviating concerns about rising price pressures. The pound initially gained ground but later reversed its gains following the release of the data.

In Asia, most stock markets fell, with shares dropping in South Korea, Japan, and Australia. Hong Kong indexes initially dipped but reversed course as trading resumed after the Lunar New Year holiday, with investors closely monitoring Beijing’s actions to address market volatility.

The yen rebounded slightly after Masato Kanda, Japan’s top currency official, signalled authorities’ readiness to intervene in currency markets if necessary. Meanwhile, US equity futures edged higher following sharp declines on Wall Street the previous day.

The release of US inflation figures dashed hopes for an early Fed rate cut, leading to a surge in Treasury yields. Swap traders adjusted their expectations for Fed rate cuts, reflecting reduced odds of a May cut and less easing anticipated throughout the year.

In the UK, consumer prices rose 4% in January compared to a year earlier, matching December’s pace and defying expectations for a slight uptick. This news came as a relief to policymakers and private-sector economists who had anticipated a higher inflation rate.

Elsewhere, Japan’s issuance of sovereign transition bonds received strong demand despite skepticism about the debt’s environmental credentials. In Hong Kong, shares of WuXi AppTec Co. and WuXi Biologics (Cayman) Inc. slumped amid calls for a formal probe by US lawmakers, while Meituan shares gained on reports of increased offsite meal orders during the Lunar New Year holidays.

Oil prices edged lower after a mixed US inventory report, while gold traded in a narrow range after dipping below $2,000 an ounce for the first time in two months. Bitcoin hovered near the $50,000 mark, reflecting ongoing volatility in the cryptocurrency markets.

Looking ahead, investors will closely monitor upcoming events, including Eurozone industrial production and GDP data, BOE Governor Andrew Bailey’s testimony, and a slew of speeches by Fed officials, among others.

Overall, global markets remain sensitive to economic data releases and geopolitical developments, with investors navigating uncertainties surrounding inflation, interest rates, and central bank policies.