Stock indices continued to grow amid declining inflation pressure in the United States

The US consumer price index fell from 7.1% to 6.5% (forecast 6.5%) on an annualized basis. Core inflation (which excludes food and energy prices) also slowed year over year from 6% to 5.7% (5.7% forecast). Lower inflationary pressures have increased bets that the Federal Reserve will move to smaller hikes. According to CME Group’s Fedwatch tool, investors now estimate a nearly 95% chance that the Central Bank will raise rates by 25 basis points on February 1. Philadelphia Fed President Patrick Harker supported a 0.25% hike next month, while St. Louis Fed President James Bullard prefers that the Fed maintain the pace of rate hikes.

Weekly initial US jobless claims came in at 205,000, below the expected 215,000. Many market participants are looking for signs of weakness in the labor market as another signal of slowing inflation.

Today is the start of the reporting season in the United States. As usual, the banking sector will report first. Analysts are predicting weak data, with the expectation that Q4 2022 earnings will be worse than Q3. But this does not apply to retailers, which may show good results at the end of the quarter due to Christmas sales.

Gold prices hit an eight-week-high. A decline in US inflation increases the likelihood that the US Federal Reserve will move to a slower interest rate hike, which is positive for precious metals. Gold and silver are inversely correlated to the dollar Index and US government bond yields.

Lower inflationary pressures have returned investors’ appetite for risky assets, including oil. Crude oil futures rose for the fifth time in seven days, with WTI crude for February increased by 1.3% yesterday. London Brent crude oil for March delivery jumped by 1.7%. The fundamental picture is now pointing toward further growth in oil prices.

Asian markets were mostly on the rise yesterday. Japan’s Nikkei 225 (JP225) gained 0.01%, China A50 (CHA50) added 0.32%, Hong Kong’s Hang Seng (HK50) increased by 0.36%, India’s NIFTY 50 (IND50) fell by 0.21%, while Australia’s S&P/ASX 200 (AU200) was up 1.18% on the day.

The Japanese government’s Higher Economic Policy Commission invited eight economists, including inflation and monetary policy experts, to upcoming special meetings to discuss the country’s long-term policy. Analysts believe that these meetings are intended to discuss the strategy of the Bank of Japan’s exit from the soft monetary policy program and the development of a new agreement between the Bank of Japan and the government.