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Earnings season kicks off - US inflation higher than expected

Quarterly reports from major Wall Street banks such as JPMorgan and Citigroup will kick off the fourth-quarter earnings season today, potentially providing a fresh boost to equity markets. Meanwhile, stronger-than-expected US inflation data dampened hopes of an imminent interest rate cut by the Federal Reserve.  

Alessandro Fezzi, LGT
Reading time
5 minutes
Corporate earnings season
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In the US, stock market indices held their ground despite the stronger than expected rise in the US inflation rate. The Dow Jones Industrial briefly hit a new record high, closing at 37,711.02 (+0.04%). The S&P 500 also closed little changed at 4,780.24 (-0.07%). Indices on the Nasdaq technology exchange also closed around the same levels as the previous day. Microsoft shares were the standout performer, hitting a new record high and briefly overtaking Apple as the most valuable publicly traded company yesterday. Cryptocurrency providers also continued to attract attention after the US Securities and Exchange Commission (SEC) cleared the way for exchange-traded bitcoin funds. However, initial gains were followed by profit-taking. In the US bond market, the benchmark yield on ten-year Treasuries fell back below the 4% level and currently stands at 3.98%.

The latest data on US consumer prices showed stronger than expected inflationary pressures, reducing the chances of a Fed rate cut soon. The annualised inflation rate was 3.4% in December, up from 3.1% in the previous month, taking US inflation back to its highest level in three months. Analysts had expected only a moderate increase to 3.2%. On a monthly basis, consumer prices also rose by 0.3% at the end of last year, slightly more than expected (consensus +0.2%). On a core basis, i.e., excluding the often-volatile energy and food prices, consumer prices fell to 3.9% in December from 4.0% in November (consensus 3.8%). According to the CME's FedWatch tool, there is a 63% probability that the Federal Reserve will cut interest rates for the first time in March.

Asia-Pacific markets were mixed after China released weaker-than-expected inflation and deflation data for December and Japanese stock markets extended their record rally. Hong Kong's Hang Seng Index fell by around 0.15%. Chinese consumer prices fell by 0.3% in December for the year. Economists had forecast a fall of 0.4%, following a deflation rate of 0.5% in November. Producer prices also fell again, by 2.7% year on year. Over the year, consumer prices in China rose only slightly, by 0.2%. At the same time, China's exports exceeded expectations in December, but overall trade in the world's second largest economy fell in 2023. Separately, Tokyo stock indexes continued their record run. The Nikkei 225 rose by more than 2% at one point and ended the week up 1.2%. In contrast, South Korea's Kospi fell 0.7% and the small cap Kosdaq lost 1.7%. In Australia, the S&P/ASX 200 fell 0.1% on Friday.

In the currency markets, the Turkish lira fell to a new record low against the US dollar on Thursday. The greenback climbed above the 30-lira mark for the first time. Last year, the Turkish currency lost almost 40% against the US currency. At the same time, inflation in Turkey recently climbed to around 65%.

Corporate news in focus: Q4 results from JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, and United Health.

Economic data in focus: UK industrial production November (08:00), France consumer prices December (08:45), Spain consumer prices December (09:00), US producer prices December (14:30).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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