US equities gain as data shows the biggest jump in CPI since 1982

US equities gained yesterday as consumer price inflation the-year-on-year headline figure came in line with expectations but near 40-year record. The Dow Jones Industrial average rose 0.1% to 36,290, the S&P 500 Index increased 0.3% to 4,726 and the Nasdaq gained 0.2% to 15,188. The turbulent start of 2022 has been fostered by the rising expectations that the Fed and other global central banks will be accelerating the tightening path. Yesterday’s testimony from Fed Chair Jerome Powell seemed to not spook the markets as he did not ramp up his recently hawkish tone. Concerns over the omicron continued to ease, but questions about its impact on global supply chains and worker shortages continue to persist. Treasuries were mixed with 10-year yield declining 1 bp to 1.73%, while the 30-year bond rate increased 1 bp at 2,09%. 10-year yields edged up today to 1.7499. US Dollar declined with DXY trading currently around 94.77. Today’s focus will be on PPI with core rate expected to gain 0.5% m/m. Initial jobless claims are forecasted to show 200k increase in claims.

European stock markets have dipped at the open with FTSE 100 losing 0.2% to 7538, DAX trading 0.2% lower to 15978 and CAC 40 dropping 0.57% to 7196. Boris Johnson in the UK bought some beathing space by apologizing for attending a party at his Downing Street office during pandemic lockdown, but anger in the ruling conservative party means his job might be in danger. Several European companies are reporting results this Thursday including Tesco, Marks & Spencer, Persimmon and Suedzucker.  Investors will be looking for monetary policy clues with officials from BoE and ECB due to speak today. EURUSD is trading steady near 1.1450. Bunds rallied and peripheral spreads tightened yesterday despite the heavy EGB and SSA supply.

Asian shares stumbled this morning dragged lower by the weakness in Chinese economic data, as data showed that mainland bank lending fell more than expected in December, causing property and consumption sectors to sink. Chinese blue-chips dropped 1.3%, while MSCI broadest index of Asia-Pacific shares outside Japan traded flat after biggest gain in this month yesterday. Japan’s Nikkei lost nearly 1% after a rise of 2% a day before.

Oil prices are trading down this Thursday with Brent Crude losing 0.2% to $84.48 and WTI slipping 0.2% to $82.44. After big gains from previous two sessions, the remaining uncertainty over near-term demand is driving the prices lower, as highly contagious Omicron cases surge around the globe. Data from US Energy Information Administration on Wednesday showed fuel demand took a hit from Omicron with gasoline stockpiles increasing by 8 million barrels in the week to January 7th.