European Stocks, Bonds Rise as UK Inflation Slows: Markets Wrap

By Pune Media On Jan 15, 2025 18

(Bloomberg) — European stocks edged higher and bond yields slipped as an unexpected slowdown in UK inflation followed a benign wholesale price reading in the US, encouraging hopes that price pressures could be starting to recede.

Most Read from Bloomberg

British consumer prices rose 2.5% from a year earlier in December, better than the 2.6% reading forecast by economists. Europe’s Stoxx 600 equity gauge rose 0.4%, with London’s FTSE 250 index gaining 1.5% as the inflation reading kept alive hopes of a Bank of England interest-rate cut next month.

The print also sent the pound as much as 0.4% lower, while 10-year gilt yields slid seven basis points, bringing relief to a market that’s borne the brunt of the recent bond selloff.

While US consumer inflation data due later in the day is keeping traders wary of making big bets, Treasury 10-year yields slid two basis points and Bloomberg’s dollar gauge extended Tuesday’s 0.4% drop. US equity futures held steady.

Wednesday’s US consumer price report comes at a crucial time for world markets pressured by a pullback in expectations of rate-cuts from the Federal Reserve and other central banks. Forecasters expect to see a fifth month of increases, with the so-called core CPI up 0.3% in December.

Investors say that with 10-year rates approaching the psychologically key 5% level, markets will remain jittery. Thirty-year yields hit new highs above 5% on Tuesday.

“The influence of interest rates has moved to the forefront of what’s moving the market from a day-to-day perspective,” said Matt Stucky, a portfolio manager at Northwestern Mutual Wealth Management. “Since we passed that 4.5% threshold on the 10-year Treasury, the market became really fixated on that, and that brings even greater emphasis on the incoming inflation data.”

Equity investors will also turn their attention to the US corporate earnings season, which kicks off in earnest on Wednesday with some of the world’s biggest banks, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc.

The reports should offer cues about the strength of the US economy, with lenders likely to be quizzed about the impact of fewer Fed rate cuts.

“It’s too early to gain updates for the whole of 2025, but any insight on the health of the US consumer is what we’re looking for this week,” Stucky said.

Earlier, shares in Taiwan Semiconductor Manufacturing Co. dropped more than 2% after a report that the US will unveil more regulations to keep advanced chips from flowing to China. In currency markets, the yen strengthened against the dollar, as Bank of Japan Governor Kazuo Ueda hinted at a possible rate hike at the next policy meeting

Story Continues

Key events this week:

Eurozone industrial production, Wednesday
Citigroup, JPMorgan, Goldman Sachs, BNY, Wells Fargo and BlackRock earnings, Wednesday
US CPI, Empire manufacturing, Wednesday
Fed’s John Williams, Tom Barkin, Austan Goolsbee and Neel Kashkari speak, Wednesday
TSMC earnings, Thursday
ECB releases account of December policy meeting, Thursday
Bank of America, Morgan Stanley earnings, Thursday
US initial jobless claims, retail sales, import prices, Thursday
China GDP, property prices, retail sales, industrial production, Friday
Eurozone CPI, Friday
US housing starts, industrial production, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.4% as of 8:41 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures rose 0.1%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.2%
The MSCI Emerging Markets Index was little changed

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0301
The Japanese yen rose 0.5% to 157.11 per dollar
The offshore yuan was little changed at 7.3477 per dollar
The British pound was little changed at $1.2209

Cryptocurrencies

Bitcoin rose 1% to $97,369.79
Ether rose 0.6% to $3,235.31

Bonds

The yield on 10-year Treasuries declined one basis point to 4.78%
Germany’s 10-year yield declined two basis points to 2.63%
Britain’s 10-year yield declined five basis points to 4.84%

Commodities

Brent crude rose 0.6% to $80.38 a barrel
Spot gold rose 0.2% to $2,683.25 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Wenjin Lv and Ruth Carson.