2025-01-15 11:11

Jan 15 (Reuters) - A look at the day ahead in U.S. and global markets from Mike Dolan This week's initial sweep of inflation readouts has calmed New Year market turbulence, but the main event is yet to come and it's harder to dispel concern about the rest of the year. With the critical U.S. consumer price report for December due later on Wednesday, the advance soundings at home and abroad were somewhat encouraging - both U.S. producer price and British consumer price inflation for last month undershot forecasts. And given both U.S. Treasuries and British gilts have been at the centre of this year's bond storm, this has offered crumbs of comfort to restive debt markets. But there are no champagne corks popping yet. Impressive headlines aside, the details of the U.S. PPI were far more mixed and sticky components - such as air fares - may yet irk the Federal Reserve's favored PCE inflation gauge. So that just spins everything back into the CPI release, with big U.S. banks kicking off the U.S. corporate earnings season before that hits later today. The upshot for bonds is that 10-year Treasury yields have come off the boil, ticking back about 5 basis points from 14-month highs above 4.8% first thing on Wednesday. Fed futures are back comfortably pricing one more Fed rate cut this year, though hesitating at two. And as night follows day, that's pulled the dollar index (.DXY) , opens new tab back lower too. The less equivocal UK inflation data saw 10-year gilts outperform after their torrid start to 2025, offering considerable relief to a government wary of being forced to tighten fiscal policy again before its underlying growth priority materialises. The 30-year gilt yield , the most alarming this year has pulled back up to 10bps from the 27-year highs it set on Monday. Despite the implications for Bank of England easing, the pound seems to have held the line. Curiously, Britain's banks have resisted upping mortgage rates into the gilt jolt. Many are accepting smaller profit margins and bigger risks on UK mortgage lending despite a tightening of sterling money markets - with their appetite to lend greater than worries about higher funding costs. For U.S. stock markets starting to turn heads to the earnings season, the bond stabilisation has given some solace. The S&P500 (.SPX) , opens new tab edged higher on Tuesday, with the small cap Russell 2000 (.RUT) , opens new tab outperforming. Futures are up marginally ahead of the bell. European stocks (.STOXXE) , opens new tab were higher too, with inflation updates from France and Spain coming in on forecast - the former remaining below 2% for the fourth month running. The European Central Bank is likely to keep easing policy this year but needs to be cautious as exceptional uncertainty - from a potential global trade war to domestic politics - clouds the outlook, two of the bank's top officials said on Wednesday. "From our point of view, saying here's where we think the future rate path is going to be conveys a sense of certainty that we don't feel," ECB Chief Economist Philip Lane said in Hong Kong. And it's that level of uncertainty - not least about the potentially inflationary policies of U.S. President-elect Donald Trump's incoming administration - that means bond market relief about backward-looking inflation data may be tempered. Trump's inauguration is on Jan. 20, but the confirmation hearing for his Treasury Secretary nominee Scott Bessent is due tomorrow. Elsewhere, Chinese stocks (.CSI300) , opens new tab underperformed as they gave back part of Tuesday's sharp rally. Trepidation about looming U.S. tariff hikes and a fresh sweep of U.S. technology curbs is keeping sentiment subdued ahead of Friday's big economic data dump of quarterly GDP and December industry numbers. Perhaps one factor unnerving world bond markets this month, Japan's yen firmed against the softer dollar as speculation builds about another interest rate rise from the Bank of Japan as soon as next week. The Bank of Japan will debate whether to raise interest rates next week, Governor Kazuo Ueda said on Wednesday, signalling its intention to take borrowing costs higher barring a Trump-driven market shock. "There was a lot of positive talk on the wage outlook" when the BOJ's regional branch managers met last week, Ueda said. "We will discuss whether to raise interest rates at next week's policy meeting and would like to reach a decision." Key developments that should provide more direction to U.S. markets later on Wednesday: * US December consumer price report, NY Federal Reserve January manufacturing survey * Federal Reserve issues Beige Book of economic conditions * New York Federal Reserve President John Williams, Chicago Fed President Austan Goolsbee, Minneapolis Fed chief Neel Kashkari and Richmond Fed chief Thomas Barkin all speak; Bank of England policymaker Alan Taylor and BoE Executive Director for Financial Stability Strategy and Risk Nathanael Benjamin both speak * US corporate earnings: BlackRock, JPMorgan, Citigroup, Well Fargo, Goldman Sachs, Bank of New York Mellon Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-pix-2025-01-15/

2025-01-15 11:02

Investors closely watching Trump's Jan 20 inauguration speech Trade, immigration, regulation among potential topics in focus Stock market had tepid reaction to past inaugurations, but some say this could be different NEW YORK, Jan 15 (Reuters) - Donald Trump's inauguration on Monday could herald a more volatile period for markets, with the Republican seen moving quickly on a wide swath of issues including trade and immigration that are expected to swing asset prices. Trump's tariff plans could further fan inflation fears that pressures bond and stock prices, while efforts to tighten immigration controls could also reverberate through those markets. Moves to ease regulation are poised to lift assets, including crypto and bank stocks. "The markets will be very sensitive to this speech," said Jeff Muhlenkamp, a portfolio manager at investment management firm Muhlenkamp & Co. "Everyone right now is trying to parse every word and nuance that comes from Trump or his biggest allies.” Some prices already incorporate Trump's expected policy aims, among them tax cuts, reduced regulations and tariffs on foreign imports. The address could also lay the groundwork for White House actions in the coming days and weeks. “Financial markets are primed to move on any indication that the new administration might pursue a different course than it has telegraphed up until now,” said Doug Peta, chief U.S. strategist at BCA Research. In general, stocks have had a tepid reaction to presidential inauguration, although this time could be different given Trump's potential to be unpredictable and ability to shake markets with his commentary, investors said. With inaugurations since World War II, the S&P 500 has posted an average decline of 0.27%, with the index rising or falling on about half the occasions on the day of the speeches themselves or on the first day of trading following instances markets were closed, according to LSEG data. Following Trump's last inaugural address, in January 2017, the S&P 500 ended up 0.3% on the day. The U.S. stock and bond markets are closed on Monday, which is also the Martin Luther King holiday, so much of the trading reaction may not be evident until Tuesday. During the entirety of Trump's first term, the S&P 500 rose nearly 68%, but markets saw bouts of volatility, stemming in part from a trade war Trump fought with China. STEAM BEHIND TRUMP TRADE? Of course, investors for months have been shifting portfolios based on the impending change in the White House, with many so-called "Trump trades" gaining steam even ahead of the November election when he was leading in polls and betting markets. For example, shares of Tesla (TSLA.O) , opens new tab, which is led by Trump backer Elon Musk, have soared 60% since the Nov 5 election. Other gainers include bitcoin, which has jumped over 30% since Trump's win amid optimism for a friendlier regulatory environment, and private prison stocks Geo Group (GEO.N) , opens new tab and CoreCivic (CXW.N) , opens new tab, which have climbed about 100% and 60%, respectively, as investors anticipate an immigration crackdown could increase need for detention centers. "The markets are trying to start to price in policy before the policy has come into vision in any clear way," said Tony Roth, chief investment officer at Wilmington Trust. Some "Trump trades," however, have faded. Those include shares of regional banks and small-cap companies, which are both expected to benefit from a de-regulation push under Trump, and have given up at least some of their post-election gains. The broader stock market has also lost steam. Optimism over Trump's expected pro-growth agenda including reduced taxes and regulations broadly benefited equities following the election. But the S&P 500 has pulled back and is now up about 1% since Nov 5. Persistent inflation is leading markets to predict the Federal Reserve will end its interest rate cutting cycle sooner than previously hoped, undercutting the stock market's momentum. WARY OF TARIFF TALK Investors are wary of specific topics causing ruptures. David Bianco, Americas chief investment officer at DWS Group, will be listening for any hints about tariff introductions in the inauguration speech, adding that "Trump has got the ability to take action on tariffs and he probably does very quickly" and that such comments could "sour the mood for investors." In particular, Bianco said, "the bond market should be on guard" for Trump's comments. Benchmark Treasury yields, which rise when bond prices fall, on Friday hit their highest levels since November 2023 after a blowout U.S. jobs report fueled more inflation anxiety. Investors are mindful Trump may voice some unusual ideas, along the lines of his recently expressed desire to annex Greenland, or tout goals that suggest major spending, which could exacerbate concerns about the expanding fiscal deficit. Jay Woods, chief global strategist at Freedom Capital Markets, said he is watching which business leaders might be attending the inauguration events. "That could speak a little more to the individual companies that are looking to get an inside track with the White House," Woods said. Alex Morris, president and chief investment officer of F/m Investments, said he will be listening for Trump's tone, including “every sentence that focuses on his anger rather than policy or platitudes." "The longer that anger continues," Morris said, "the more likely it is that bonds get cheaper, equities get cheaper." Sign up here. https://www.reuters.com/markets/us/trumps-us-presidency-return-ushers-new-era-volatile-markets-2025-01-15/

2025-01-15 10:11

MUMBAI, Jan 15 (Reuters) - The Indian rupee rebounded on Wednesday, after falling to a lifetime low in the prior session, to log its best day in over seven months, aided by a softer greenback and strong dollar sales by foreign banks. The rupee closed at 86.3625 against the U.S. dollar, up 0.3% on Wednesday, its best single-day percentage rise since June 3, 2024. The currency had declined to an all-time low of 86.6475 in the previous session. It recovered on Wednesday, helped by the dollar index's retreat from a more than two-year peak and dollar sales by at least two large foreign banks, likely on behalf of custodial clients, traders said. Despite the day's gains, the rupee has weakened about 3% since Donald Trump's victory in the U.S. Presidential elections in November, which sent the dollar soaring, while concerns about India's slowing growth also added pressure on the local unit. In light of the currency's sharp decline, some analysts are pushing back expectations for interest rate cuts by the Reserve Bank of India as a weaker currency fans worries about inflation. The central bank is also expected to use its foreign exchange reserves more judiciously as it looks to quell market volatility amid persistent headwinds, Reuters reported on Tuesday. On the day, though, the rupee found some breathing room as the dollar index dipped to 109, while Asian currencies were mostly rangebound ahead of a closely watched U.S. consumer inflation report. Economists polled by Reuters expect the month-on-month core consumer price index (CPI) to tick up to 0.3% in December, up from 0.2% in November. "A hot CPI today could easily get investors jittery on the inflation topic before tariffs are even considered," ING Bank said in a note, referring to trade tariffs being introduced by incoming President Trump. Sign up here. https://www.reuters.com/markets/currencies/rupee-rebounds-post-best-day-over-7-months-us-inflation-data-focus-2025-01-15/

2025-01-15 09:33

NAIROBI, Jan 15 (Reuters) - Kenya's shilling was steady against the U.S. dollar on Wednesday, data from the London Stock Exchange Group showed. At 0923 GMT, the shilling traded at 129.25/129.75 per dollar, the same level as the close of trading on Tuesday. Sign up here. https://www.reuters.com/markets/currencies/kenyan-shilling-steady-against-dollar-lseg-data-shows-2025-01-15/

2025-01-15 07:35

Headline inflation 2.5% versus Reuters poll 2.6% Services inflation lowest since March 2022 Investors add to BoE rate cut bets Analysts say payroll tax rise likely to push CPI up LONDON, Jan 15 (Reuters) - British inflation slowed unexpectedly last month and core measures of price growth - tracked by the Bank of England - fell more sharply, according to official data that will be welcomed by Finance Minister Rachel Reeves after a market selloff. The annual rate of inflation edged down to 2.5% in December from 2.6% in November, the Office for National Statistics said, in contrast to economists' expectations in a Reuters poll for it to remain unchanged. Inflation is expected to rise again due to higher energy prices, continued fast wage growth and temporary stimulus in October's budget, and many analysts forecast it will top 3% in early 2025. Reeves said there was "still work to be done". But investors increased their bets on the BoE cutting interest rates, putting an 84% chance on a first quarter-point reduction on Feb. 6, the date of its next scheduled monetary policy announcement. Two rate cuts for 2025 were fully priced into the market, up from around a 60% chance before the data. British government bond yields dropped from multi-decade highs hit in previous days. Sterling fell after the figures were published but then reversed course to be broadly unchanged on the day. The BoE has said Britain's persistent inflation pressure means it will move only gradually with reducing borrowing costs despite signs that the economy is losing momentum. The likelihood of slow rate cuts has contributed to a jump in borrowing costs that has threatened to knock Reeves off target for meeting her budget rules, possibly requiring her to cut public spending. "For now, this slightly softer report should help reassure investors that the BoE can continue with its gradual easing cycle, and we expect the next rate cut in February," Luke Bartholomew, deputy chief economist at abrdn, said. The BoE forecast in early November that inflation would be 2.5% in December before rising to around 2.75% in the second half of 2025. "Policymakers and Treasury officials will be breathing a small sigh of relief," Scott Gardner, investment strategist at J.P. Morgan-owned digital wealth manager Nutmeg, said. CORE MEASURES SLOW The fall in the headline CPI rate reflected cheaper hotel rooms, air fares and clothes and a smaller rise in tobacco prices than in 2023. The ONS said part of the 26% fall in air fares compared with December 2023 might have been because this December - unlike in 2023 - data was collected for fares with return flights on Christmas Eve or New Year's Eve. These are unpopular dates for return travel. Underlying measures of price growth, which the BoE sees as a better guide to medium-term price pressures, also slowed by more than expected. Core inflation, which excludes energy, food, alcohol and tobacco prices, fell to 3.2% from 3.5% in November. Services inflation stood at 4.4% in December - its lowest since March 2022 - compared with 5.0% a month earlier, the ONS said. Economists had forecast it would dip only to 4.9%. "Are we on a linear path down for inflation? We don't think so," Sanjay Raja, Deutsche Bank's chief UK economist, said, pointing to increases in April in the minimum wage and employers' social security contributions as well as higher energy and food costs. "That said, the jump in price momentum will likely be temporary, with price inflation expected to normalise to more target-consistent levels next year." Factory gate prices in December were 0.1% higher than a year earlier after November's 0.5% drop. Sign up here. https://www.reuters.com/world/uk/uk-inflation-unexpectedly-falls-25-december-2025-01-15/

2025-01-15 07:28

Jan 15 (Reuters) - Dense fog and cold weather delayed train and flight departures in several parts of northern India, including its capital New Delhi, on Wednesday. India's weather office issued an orange alert for Delhi, the second highest warning level, forecasting dense to very dense fog in many areas. Visibility at Delhi's main airport was between zero to 100 metres (328.08 ft), the weather office said, and more than 40 trains across northern India were delayed because of fog, local media reported. Some aircraft departures from Delhi were delayed, airport authorities said on social media platform X, warning that flights lacking the CAT III navigation system that enables landing despite low visibility would face difficulties. Delhi's main airport handles about 1,400 flights every day. "Low visibility and fog over Delhi may lead to some delays," the country's largest airline IndiGo said in a social media post. Local media showed images of vehicles crawling along highways through the fog, and people huddled indoors as the temperature dipped to 7 degrees Celsius (44.6 degrees Fahrenheit). Delhi was ranked as the world's most polluted city in live rankings by Swiss group IQAir on Wednesday, with a reading of 254, ranked as "very unhealthy". The Indian capital has been battling poor air quality and smog since the beginning of winter. Sign up here. https://www.reuters.com/world/india/dense-fog-over-indian-capital-delays-flights-trains-2025-01-15/