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Wall Street wobbles amid hotter-than-expected US CPI

Bear market

Hotter-than-expected CPI data sent jitters to Wall Street, with three US benchmark indices finishing mixed after a volatile session. The US headline inflation for January printed at 6.4% year on year, higher than an estimated 6.2%. On a monthly basis, inflation rose 0.5% from the prior month, also greater than the consensus of 0.1%. The US bond yields spiked on the unexpected data, pushing the US dollar to reverse early losses against other major currencies. While gold was flat after swinging in directions, oil prices finished lower but bounced off session lows. The re-rampant inflation is certainly not good news for the global markets. But investors seem to be relaxed about the data as the fear gauge, VIX dropped 9% to 18 on Tuesday.

Asian markets are set to open slightly higher following the mixed session on Wall Street, with the ASX 200 futures up 0.01%, Nikkei 225 rising 0.43%, and Hang Seng Index up 0.09%.

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  • Both Dow and S&P 500 finished lower, while Nasdaq was higher. 4 out of the 11 sectors in the S&P 500 closed in green, with Consumer Discretionary leading gains, up 1.18%, led by Tesla. The other tech sectors, including Technology and Communication Services, also outperformed, up 0.44% and 0.01%, respectively. Real Estate was the biggest laggard, down 1% due to a jump in rates.
  • The Fed’s vice chair Brainard has been appointed as the new head of the National Economic Council by President Joe Biden, leaving the position blank for a replacement. Brainard is one of the most dovish policymakers among the Fed’s 19 committee members and warned of potential risks to the economy by overtightening the monetary policy.
  • Airbnb’s shares jumped 12% due to a beat on earnings expectations. The company reported 48 cents in earnings per share and $1.9 billion in revenue, beating an estimated 25 cents and $1.86 billion. In the further quarter, the revenue grew by 24% year on year, with $319 million in net income, up from $55 million a year ago.
  • USD/JPY extended gains and rose above the key resistance of 132.50 after the government nominated Kazuo Ueda as the new BOJ’s governor. The hotter-than-expected US CPI data has also pushed the US dollar index to bounce off a session low, which potentially strengthens the king dollar further.
  • New Zealand dollar weakens amid a decline in the RBNZ inflation expectations in the first quarter, fuelling hopes for a slowdown rate hikes by the RBNZ. The country’s 2-year inflation expectations dropped to 3.3% from 3.6% in the prior quarter, but the 1-year inflation expectation rose to 5.11% from 5.08% in Q4.
  • Crude oil prices fell the for the second straight trading day following the unexpected US CPI data. The news that the US SPR plans to sell another 26 million barrels also pressed on oil prices. However, the crude oil markets bounced off session lows. The resilient moves suggest that crude prices may continue their rebounding trend in February, despite the recent pullback.
  • Cryptocurrencies popped following the US CPI data amid the tech shares’ strong moves. Despite the jittery session on Wall Street, cryptocurrencies rose on a broad basis, as risk-on sentiment in the tech sectors may have helped the digital markets’ rebound after a sharp pullback in early February. 
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