Fed Must Remain on Guard on Inflation, James Bullard Says
Topic of the day
Inflation is moderating in response to the Federal Reserve's aggressive rate hikes of 2022, but the central bank must continue to guard against the risk that price increases stay high or reaccelerate, Federal Reserve Bank of St. Louis President James Bullard said. The policy maker also said the market is probably too optimistic about inflation, speaking at an economic forecast forum Thursday. "The risk here is that while inflation is moderating, it does not moderate as quickly as markets are currently expecting," said Mr. Bullard, who isn't a voting member of the Fed's interest-rate-setting committee this year. "It could be that inflation starts to go in the other direction again and then the Fed would have to react to that." Mr. Bullard spoke after the latest U.S. consumer-price index reading showed inflation continues to slow. The index was up 6.5% in December from a year ago, compared with a 7.1% rise in November and a peak of 9.1% in June.
After holding gains following a firm start Thursday morning, the Switzerland market very nearly dropped into negative territory in late afternoon trade, but recovered swiftly to eventually end the session on a firm note. The benchmark SMI ended with a gain of 41.81 points or 0.37% at 11,287.82. The index, which climbed to 11,328.80 about an hour past noon, dropped to 11,247.96 before climbing higher again. Credit Suisse and Swiss Life Holding surged 2.8% and 2.7%, respectively. Swiss Re ended nearly 2% up. Sika and Lonza Group advanced 1.6% and 1.4%, respectively. UBS group, Richemont, ABB, Swisscom, Partners Group and Alcon gained 0.6 to 1.2%. Shares of of software and computer peripherals manufacturer Logitech plunged nearly 17% after the company cut its sales outlook. Givaudan ended 1.25% down, while Roche Holding ended lower by 0.29%. Roche said it has received European Commission approval for Xofluza in children aged one year and above. In the Mid Price Index, Zur Rose rallied nearly 7%. Schindler Holding gained about 4% and Schindler Ps climbed 3.4%.
European stocks closed higher on Thursday as soft U.S. inflation data helped outweigh concerns about interest rates. Optimism about economic growth following China reopening contributed as well to markets' positive performance. The pan European Stoxx 600 ended 0.74% up. The U.K.'s FTSE 100 climbed 1.07%, Germany's DAX surged 0.86%, France's CAC 40 gained 0.91% and Switzerland's SMI gained 0.37%. Among other markets in Europe, Austria, Belgium, Czech Republic, Denmark, Finland, Ireland, Netherlands, Norway, Poland, Portugal, Spain, Sweden and Turkiye closed with sharp to moderate gains. Iceland ended weak, while Greece and Russia settled flat. In European economic news, euro area consumers' inflation expectations eased in January, warranting slower pace of tightening from the European Central Bank. Consumer price inflation prediction for one-year ahead slowed to 5.0 percent from 5.4 percent, and that for three years ahead eased marginally to 2.9 percent from 3.0 percent, the latest Consumer Expectations Survey from the ECB showed. In the UK market, Persimmon rallied 8.33% despite warning of a slowdown in housing demand. Barratt Developments, M&G, JD Sports Fashion, Whitbread, Berkeley Group Holdings, Taylor Wimpey, St. Jame's Place, IAG, Segro, Next and Fresnillo gained 3 to 7%. Centrica gained more than 3% after raising its profit forecast. Vodafone Group shares gained after the company announced the appointment of Aldo Bisio as the Group Chief Commercial Officer, effective January 12, in addition to his current role as CEO of Vodafone Italy. B&M European Value Retail dropped 4.4%. Sage Group, Beazley, AstraZeneca, SSE, Halma, Experian, 3I Group and Smith & Nephew shed 1 to 2%.
U.S. stocks climbed Thursday after the latest inflation data showed cooling price pressures for the sixth consecutive month, likely keeping the Federal Reserve on track to slow its pace of interest-rate increases. The S&P 500 added 13.56 points, or 0.3%, to 3983.17, while the Dow Jones Industrial Average gained 216.96 points, or 0.6%, to 34189.97. The technology-heavy Nasdaq Composite rose 69.43 points, or 0.6%, to 11001.10. The indexes bobbed between gains and losses early in the session before gaining steam midday. Consumer-price inflation slowed to 6.5% in December, down from 7.1% in November, the Labor Department said. Despite landing largely in line with economists' expectations, one measure of services inflation - excluding energy services and the cost of owning or renting a home - offered encouragement that tighter monetary-policy is proving effective. Warner Bros. Discovery Inc. is raising the monthly price for the ad-free tier of its HBO Max streaming service amid an industrywide slowdown in subscriber growth and a rising emphasis on profits. The price for the ad-free tier of the app in the U.S. will rise almost 7% to $15.99 a month from $14.99 a month, effective Thursday, the company said. Current subscribers will see the increase in their next billing cycle. American Airlines Group Inc. raised its revenue guidance for the recently ended quarter as demand for air travel remained strong through the holiday season, even as travelers contended with higher fares. The guidance update offers one of the first looks at how a U.S. airline fared during a critical holiday travel period that saw thousands of canceled flights amid winter storms.
With relief, but not with euphoria, investors on the Asian stock markets receive the latest US inflation data on Friday. In doing so, they follow the line of Wall Street. In China, the Shanghai Composite rises by 0.6 per cent, the HSI in Hong Kong by 0.2 per cent. Here, weak trade data from December also provide some support. The yen, which had appreciated the previous day, weighed on the Nikkei 225 in Tokyo, which fell by 1.1 per cent against the regional trend. The Japanese currency had climbed to a seven-month high
Investors scooped up U.S. Treasurys, lifting bond prices and weighing on yields. The yield on the 10-year U.S. Treasury note slipped to 3.446% from 3.554% late Wednesday, while the yield on the two-year note - which is more sensitive to monetary-policy expectations - fell to 4.138% from 4.226%.
UBS raises Helvetia target to CHF 121 (107) – Buy
UBS raises Swiss Re target to CHF 77 (68) – Sell
HSBC raises Adidas target to EUR 150 (140) – Hold
Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.