PPI Declines More Than Expected
STOCK INDEX FUTURES
Stock index futures are higher due to indications that global inflation is cooling, and major central banks may be less hawkish.
The December producer price index declined 0.5% when a decline of 0.1% was expected.
Retail sales in December fell 1.1%, which compares to the anticipated 0.8% decline.
The 9:00 central time January housing market index is predicted to be 31 and the 9:00 November business inventories report is estimated to show a 0.4% increase.
The Fed’s Beige Book on the economy will be released at 1:00.
Futures are performing well for the news.
The U.S. dollar index is lower due to the bearish U.S. producer price index and retail sales reports.
The euro zone December consumer price index fell 0.4% on the month when a 0.3% decline was expected.
The annual inflation rate in the U.K. fell to 10.5% in December of 2022 from 10.7% in November, matching market forecasts. This marks a second consecutive month of slowing inflation and the lowest rate in three months after a peak of 11.1% in October.
The Japanese yen is lower after the Bank of Japan surprised markets with no change in policies at its meeting today. The BOJ unexpectedly kept its cap for the yield on the 10-year government bonds at 0.5%. In December the BOJ increased that cap from 0.25% and was widely expected to increase it again at this meeting.
INTEREST RATE MARKET FUTURES
Futures are higher due to the bullish producer price index and retail sales reports.
Federal Reserve speakers today are Raphael Bostic at 8:00, James Bullard at 8:30 and Lorrie Logan at 4:00.
The Treasury will auction 20-year bonds.
March fed funds futures remain above the triple top pattern at 95.3150.
According to financial futures markets currently, there is a 95.0% probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points at the February 1 policy meeting and a 5.0% probability that the rate will be hiked by 50 basis points.
The long term outlook is for higher prices.
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