Inflation in the US remained moderate again in December, boosting hopes that the US Federal Reserve (Fed) may soon cut rates. US traders were nevertheless cautious ahead of this week’s Federal Open Market Committee meeting on Wednesday, where the Fed is expected to keep rates steady again. Meanwhile, European stocks were up considerably to finish the last session of the week. On Monday, Asian markets were trading mostly higher despite concerns about struggling property giant China Evergrande, which was ordered to liquidate on Monday.
US Personal Consumption Expenditures (PCE) price index was up 0.2% in December when compared to November. Core PCE – which strips out volatile food and energy prices and is the Fed’s preferred gauge of inflation in the US economy – also gained 0.2% compared to November. When compared to the same month a year ago, core PCE was up 2.9%. While that number is still higher than the Fed’s target of 2%, a month-on-month reading of around 0.2% over several months will likely bring annual inflation within the range the Fed considers to be acceptable. Recent solid economic data out of the US have lowered the probability of a cut as early as March, but most market participants still expect rates to fall by the summer.
In New York, stock indices couldn’t keep up the pace to end the week after reaching multiple new highs earlier in the week. The Dow Jones Industrial finished Friday’s session up 0.2% but the S&P 500 fell 0.1%. The Nasdaq-100 dropped 0.6%, dragged down by chipmaker Intel, which lost nearly 12% after reporting quarterly results and an outlook that failed to meet market expectations.
Luxury goods company LVMH shares shot up nearly 13% on Friday after the company posted solid fourth-quarter results on Thursday after the close of trading. The strong performance also benefitted the company’s French luxury rivals, with Kering and Hermes shares both up around 6.6%. LVMH’s strong performance on Friday helped France’s CAC 40 to a gain of 2.3%. The Euro Stoxx 50 closed 1.2% higher.
In the Asia-Pacific region, stock markets were trading mostly higher to start the week. Hong Kong’s Hang Seng Index was up 0.8%, while the Shanghai Composite lost 0.3%. Trading of shares of Evergrande was halted on Monday following an order to liquidate the property developer by a court in Hong Kong. The company, which has liabilities totalling more than USD 300 billion, has been struggling to reach a restructuring deal with creditors. Elsewhere in Asia, Tokyo’s Nikkei 225 gained 0.8% and in South Korea, the Kospi was 0.9% higher. In Australia, the S&P/ASX 200 finished Monday’s session with a gain of 0.3%.
Consumer sentiment in Germany was looking bleak to start off the new year. The GfK Consumer Climate showed both economic and income expectations in sharp decline. Consumer sentiment dropped 4.3 points from the previous month to -29.7 points in the February forecast. The main reasons for the poor mood among consumers are crises and war, as well as high inflation, according to GfK. Germany’s DAX gained 0.3% on Friday.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: German unemployment rate, Dallas Fed Manufacturing Index.
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.