U.S. index futures are poised for a strong opening on Wednesday, indicating a significant upward move in stocks following a tepid performance in the last session. This optimistic outlook is largely driven by a positive response to the U.S. Labor Department’s consumer price inflation report for December.
The report revealed that consumer prices grew slightly more than anticipated during December, yet the yearly rate of core consumer price growth, which excludes volatile food and energy prices, experienced an unexpected slowdown. Specifically, the consumer price index increased by 0.4% in December, following a 0.3% rise in November, surpassing economists’ forecast of another 0.3% increase. Meanwhile, the annual growth rate of consumer prices climbed to 2.9% from 2.7% in November, aligning with predictions. Core consumer prices went up by 0.2% after a consistent 0.3% increase over the previous four months, matching market expectations. However, the year-on-year growth of core prices slowed to 3.2% from 3.3%, contrary to analysts' expectations of stability.
Further boosting market sentiment are positive earnings reports from financial giants JPMorgan Chase, Goldman Sachs, and Citigroup, each marking strong pre-market gains after surpassing earnings forecasts.
On Tuesday, stocks struggled for direction after early gains, with major indices oscillating around the baseline before closing modestly mixed. The Nasdaq dropped by 43.71 points to 19,044.39, while the S&P 500 increased marginally by 6.69 points to 5,842.91, and the Dow rose by 221.16 points to 42,518.28.
Initial market optimism was supported by a Labor Department report indicating that December’s producer price increase was slightly below expectations. The producer price index for final demand edged up by 0.2%, down from 0.4% in November, against a forecast of 0.3%. Nonetheless, the annual growth rate accelerated to 3.3% from 3.0%, consistent with estimates.
The modest monthly rise in producer prices alleviated some inflation and interest rate worries, although the stronger annual growth curbed buying enthusiasm. Market participants may have also exercised caution pending the consumer price inflation report's release.
Among sectors, gold stocks soared with a 2.8% jump in the NYSE Arca Gold Bugs Index, driven by an uptick in gold prices. Housing stocks also showed robust gains, as did airline stocks, reflected by the surges in the Philadelphia Housing Sector Index and NYSE Arca Airline Index, respectively. Networking, natural gas, and banking sectors exhibited strength, though pharmaceutical stocks faced a downturn.
**Commodity and Currency Markets**
Crude oil futures are on the rise, up $0.66 to $78.16 per barrel, recovering from Tuesday’s $1.32 drop to $77.50. Gold has appreciated $29.80, trading at $2,712.10 per ounce, following a modest $3.70 increase on Tuesday. In currency markets, the U.S. dollar is slightly weaker against the yen, trading at 156.34 yen versus Tuesday's 157.96 yen. Against the euro, the dollar is at $1.0335, up from $1.0308.
**Asia**
Asian markets ended relatively unchanged on Wednesday, amid reports that U.S. President-elect Trump's economic team is considering incrementally raising tariffs monthly. Investors were also digesting the soft U.S. producer inflation figures, while anticipating December’s CPI data for further insights into future interest rate adjustments. The halt in the dollar's rally provided a boost to oil and gold prices during Asian trading hours.
On the regional front, China's Shanghai Composite Index slipped by 0.4% to 3,227.12, with investors looking ahead to Chinese GDP figures due later in the week. Conversely, Hong Kong's Hang Seng Index edged up 0.3% to 19,286.07 after a volatile trading session.Japanese markets experienced negligible changes, while the U.S. dollar fell to the lower 157-yen range following a statement from Bank of Japan Governor Kazuo Ueda. He announced that the central bank will consider whether to raise interest rates in its upcoming monetary policy meeting.
The Nikkei 225 Index closed slightly lower at 38,444.58, marking a five-day losing streak and hitting its lowest point in over a month. The wider Topix Index, however, ended 0.3% higher at 2,690.81. Nintendo shares climbed by 2.5%, buoyed by anticipations of the imminent launch of the highly awaited Switch 2 console.
In Seoul, stocks remained relatively unchanged, with the Kospi ending slightly down at 2,496.81 in the wake of the arrest of impeached President Yoon Suk Yeol, linked to his unsuccessful attempt at declaring martial law last month.
Australian markets dipped marginally ahead of pivotal U.S. inflation figures due later in the day. The S&P/ASX 200 Index decreased by 0.2% to 8,213.30, primarily influenced by a decline in tech stocks. Wisetech Global and Infomedia experienced drops of 4-5%. Concurrently, the All Ordinaries Index finished 0.2% lower at 8,456.80. Across the Tasman, New Zealand's S&P/NZX-50 Index rose by 0.5% to 12,943.57.
In Europe, there was a general upward trend in stocks on Wednesday as bond yields eased following the release of unexpectedly soft U.S. producer inflation data. Investors are now focused on the forthcoming U.S. CPI data, which may provide further insights into the Federal Reserve's rate decisions for the coming months.
In Germany, the DAX Index rose by 1.5%, France's CAC 40 Index by 1.0%, and the U.K.'s FTSE 100 Index climbed 0.8%. The British pound rebounded following volatile reactions to data indicating a surprise moderation in U.K. consumer price inflation in December. The consumer price index showed a 2.5% annual increase, marginally below the 2.6% seen in November, leading traders to anticipate more Bank of England interest rate cuts this year.
Additionally, a survey from the British Retail Consortium revealed that U.K. retailers are planning price hikes this year due to increased National Insurance costs. Two-thirds of the surveyed CFOs indicated intentions to raise prices, while about half reported plans to reduce working hours or overtime opportunities.
German wholesale prices saw a slight uptick, increasing by 0.1% year-on-year in December, reversing a 0.6% decline in November, as reported by Destatis. This marks the first price rise since May 2023.
In corporate news, Hays shares advanced despite the recruitment firm reporting another drop in quarterly fees amid a challenging headhunting market. Serco's shares also saw a significant rise after securing a $247 million contract with the U.S. Army. German wind turbine manufacturer Nordex reported a considerable increase in order intake to 8.34GW, up from the previous year's 7.36GW.
In U.S. economic developments, the Labor Department reported a larger than expected rise in consumer prices for December, largely due to increased energy prices. The consumer price index rose by 0.4% after a 0.3% rise in November, exceeding economists' predictions. Annually, consumer price growth accelerated to 2.9% in December from 2.7% in November, aligning with estimates.
Core consumer prices, excluding food and energy, increased by 0.2% in December following a consistent 0.3% rise for four months, matching expectations. The annual growth rate for core consumer prices slowed to 3.2% in December from 3.3% in the previous month, though it was expected to remain unchanged.
In a separate report, the Federal Reserve Bank of New York revealed an unexpected decline in New York manufacturing activity in January. The general business conditions index fell to -12.6 from +2.1, where a negative figure indicates contraction. Economists had predicted a slight rise to +3.0. Nevertheless, future business conditions appeared more optimistic, with the index for expected business activity rising to 36.7 from 26.9.Minneapolis Federal Reserve President Neel Kashkari will make opening remarks and then participate in a fireside discussion during the virtual conference on the 2025 Regional Economic Conditions, hosted by the Federal Reserve Bank of Minneapolis, starting at 10 a.m. ET.
The Energy Information Administration is set to publish its oil inventory report for the week ended January 10th, at 10:30 a.m. ET. Projections indicate a decrease of 1.6 million barrels in crude oil inventories, following a reduction of 1.0 million barrels the previous week.
At 11 a.m. ET, New York Federal Reserve President John Williams will address the Connecticut Business and Industry Association during their Economic Summit and Outlook for 2025.
Chicago Federal Reserve President Austan Goolsbee will also speak at 11 a.m. ET, this time at the virtual Wisconsin Bankers Association Midwest Economic Forecast Forum.
The Federal Reserve will release its Beige Book at 2 p.m. ET, providing a qualitative overview of economic conditions across the twelve Fed districts.
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