[U.S. market conditions]Stocks continue to rise, CPI slows down, interest rate hike speculation recedes-yen temporarily above 128 – Bloomberg

The US stock market continued to rise on the 12th. A further slowdown in the U.S. consumer price index (CPI) in December spurred speculation that the Fed could slow the pace of rate hikes to avoid a deep economic downturn. US Treasury yields fell.

Markets were initially disappointed that the CPI slowed only in line with market expectations, but have turned their attention to the view that inflation is likely past its peak. The swaps market priced in the expectation that the next two Federal Open Market Committee (FOMC) meetings will be tightened by less than 50 basis points. This suggests that there is a low probability that the Fed will not raise rates at all in March.

U.S. Inflation Slows Further – Fed Has Room for Further Deceleration in Interest Rate Hikes (3)

Fed to hold off rate hike in March, low odds possible, swaps market suggests

“Today’s CPI data is yet another indication that the Fed’s prescription drug to keep high inflation at bay is working,” said Charles Ripley, senior investment strategist at Allianz Investment Management. “Overall, the data are in line with expectations and if the trend continues, expectations of U.S. rate hikes will decline. We are nearing the end of the rate hike cycle.”

Evercore ISI’s Krishna Guha said the CPI was consistent with expectations that the Fed would slow rate hikes to 25 basis points in February. But he expects U.S. officials to try to raise rates to a “hawkish 25 basis points.”

Philadelphia Fed President John Harker said he thinks the Fed should raise interest rates by 0.25 percentage points “from now on.” Richmond Fed President Barkin said the Fed didn’t need to raise rates as aggressively as it did last year because inflation is slowing. St. Louis Fed President James Bullard said the central bank should quickly raise interest rates above 5% to ensure that inflation pressures are contained.

Philadelphia Fed President Says 0.25pt Rate Hike Appropriate ‘Going Forward’ (1)

Richmond Fed’s calls for ‘more cautious’ rate hikes as inflation slows

St. Louis Fed’s calls for rate hike above 5% ‘as soon as possible’

US Treasuries

U.S. Treasuries rose. Yields on three-year Treasurys temporarily fell 14 basis points to 3.78% as U.S. inflation continued to slow.

“The Fed is going to land and then hold off,” said Ed Al-Husseini, rates strategist at Columbia Threadneedle Investments.

foreign exchange

The dollar fell in the foreign exchange market. The slowdown in the US CPI in December has created room for a slowdown in the pace of rate hikes.

The yen has expanded its rate of appreciation against the dollar, reaching the low 129 yen level to the dollar. At one point, the stock price rose 2.7% to 128.87 yen.The Yomiuri Shimbun said that the Bank of Japan will examine the side effects of large-scale monetary easing at its monetary policy meeting on the 17th and 18th.reportIn response, the yen had already appreciated.

Valentin Marinov, head of G10 currency strategy at Crédit Agricole CIB, said the dollar fell but the predictably weaker CPI “wasn’t much of a reason to sell the dollar.” However, “the dollar may continue to sell back against the yen. The market’s attention has shifted to next week’s pivotal Bank of Japan meeting.”

crude

New York crude oil futures rose for the sixth straight day. Buying was dominated by growing confidence in a recovery in Chinese demand and renewed signs of slowing inflation in the United States.

“The month-over-month CPI numbers will be encouraging for oil bulls,” said Harry Ultham, an analyst at StoneX Group. Because it will be,” he said.

Crude oil prices, which had been volatile since the beginning of the year, are now on the rise. Analysts maintain bullish long-term outlook.Goldman Sachs Group Inc said on Thursday that the North Sea Brent price could hit $110 a barrel by the third quarter if China’s economy reopens in earnest.Predictbottom. Morgan Stanley expects supply and demand to tighten in the second half of the year.

West Texas Intermediate (WTI) futures for February delivery on the New York Mercantile Exchange (NYMEX) rose 98 cents, or 1.3 percent, to $78.39 a barrel. London ICE North Sea Brent March delivery rose $1.36, or 1.7%, to $84.03.

Money

The New York gold market continued to rise. After the CPI announcement, the spot price temporarily rose 1.4% on speculation that the pace of U.S. interest rate hikes would slow, surpassing $1,900 an ounce for the first time since May last year. After that, the expansion to cut the increase width.

“Gold’s run immediately after the CPI announcement faltered, but investors were reminded that inflation needed to fall much further for the Fed to take a break,” said Ed Moya, senior market analyst at Oanda. I guess,” he pointed out. “Inflation needed to fall more than expected for gold to continue rising, and it clearly didn’t,” he said.

Gold futures for February delivery on the New York Mercantile Exchange (COMEX) rose $19.9, or 1.1%, to close at $1,898.80.