The US stuns the Global Markets with its Inflation Rates

Soham Aher, Senior Correspondent, U.S.A

12.00am, 20 February, 2022

Major events:

· US inflation rate jumps to a 40-year high of 7.5 percent

· Asian Currencies see downfall following US Inflation

· European and Asian Markets end on lows

· Oil prices steady amid US Fed rate hike

US inflation rates and treasury yields

The US Inflation rate data has a crumbling domino effect throughout the world, as said by Uday Kotak “When the US sneezes, the world catches a cold”

The fact that consumer prices in the United States increased more than expected in January is fuelling speculation that the Federal Reserve may hike rates soon. as well as swiftly According to Goldman Sachs Group Inc., there will be seven 25 basis-point raises in 2022, one for each meeting remaining this year. Traders are also pricing a 50 basis-point move in March at close to even odds.

President James Bullard of the Federal Reserve Bank of St. Louis, an FOMC voter this year, contributed to the conjecture on Thursday when he indicated he'd want to see a full percentage point of tightening by July 1. He also mentioned the potential of rescheduling meetings.

Despite a larger-than-expected rise in consumer prices that fanned speculation about such alternatives, Federal Reserve policymakers are not in a hurry to raise interest rates before their planned policy meeting next month, nor is a half-point increase in March plausible.

While Chair Jerome Powell only expected the rate of price hikes would slow later this year, an emergency boost risks expressing panic and reinforcing complaints that the central bank is too far behind in reigning down inflation.

After Thursday's strong market drops amid predictions on quicker Federal Reserve tightening, contracts on the S&P 500 and Nasdaq 100 reversed early losses, suggesting a reprieve for the benchmarks. The yield on the 10-year Treasury note decreased three basis points to stay around 2%. After rising to its highest level since 2009 on Thursday, the two-year yield fell four points. Bond yields were mixed across Europe, with Germany's 10-year yield falling three basis points. The value of the dollar remained stable.

Indian Rupee leads losses in Asian currencies

On Friday, Asian currencies and equities mainly declined, with the Indian rupee falling sharply as investors dumped riskier assets in response to scorching US inflation data. The rupee fell 0.5 percent, its lowest level since Oct. 6, as the United States inflation data weighed heavily a day after the central bank kept its benchmark rates unchanged. find out more

After central bank officials warned inflation will exceed a target range of 1-3 percent in the first half of 2022 before declining in the second half, the Thai baht was another big loss among currencies, down 0.3 percent and on course for its worst day since Jan. 28.

The greenback and Treasury rates remained steady following comments from St. Louis Federal Reserve Bank President James Bullard said a 7.5 percent increase in consumer prices last month had made him "dramatically" more hawkish.

Central banks in Asian developing countries are unlikely to follow the Fed in increasing rates, according to Bank of America Securities analysts, and will instead focus on helping domestic demand rebound under low inflation rates. With a 2.2 percent decrease in its benchmark index, the Philippines (.PSI) led Asian stocks down, marking its worst day since December 31. Indonesia (.JKSE) was next, down 0.7 percent, and on track for its worst drop since February 3.

Asian and European Markets plunge after US Inflation data

Asian and European markets posted negative signals on Wednesday amid resurging tensions between China and the US.

Asia

· The Asia Dow, which includes blue-chip companies in the region, lost 27.01 points, or 0.69%, to close at nearly 3,915 points.

· Tokyo’s Nikkei 225 stock exchange was also down by 40.03 points, or 0.14%, to 29,255.

· China’s Shanghai stock exchange was down by 35.33 points, or 0.98%, to 3,562 points, while India’s Sensex benchmark shed 110.79 points, or 0.18%, to close at 61,239 points.

· Only the Singapore index saw an increase on Wednesday, gaining 10.47 points, or 0.33%, to hit 3,215.

European markets

· The STOXX Europe 600, which includes around 90% of the market capitalization of the European market in 17 countries, was down by 2.14 points, or 0.45%, to 473.6 as of 0935GMT.

· London’s FTSE 100 fell by 25.61 points, or 0.35%, to 7,252 points, while Germany’s DAX index dropped 79.91 points, or 0.51%, to 15,677.

· The French CAC 40 was down by 28.67 points, or 0.42%, to 6,737 points, while Italy’s FTSE MIB posted a decrease of 147.29 points, or 0.55%, to 26,823 points.

Steady Oil Prices

On Thursday, oil prices remained stable as markets considered the risk of an abrupt and unexpected rate hike in response to a sharper growth in energy demand. Brent oil futures fell 14 cents, or 0.2 percent, to $91.41 a barrel, after rising more than 1% in early trade.

US Texas Intermediate crude increased 22 cents, or 0.3 percent, to $89.88 a barrel, after rising more than $2 earlier in the day. St. Louis Federal Reserve Bank President James Bullard said he wants a full percentage point of an interest rate rise by July 1 after US inflation data came in at its highest level in 40 years on Thursday. Oil and other commodities become more costly for individuals who hold foreign currencies when the dollar strengthens.

Oil prices rose on Wednesday as data revealed that crude stocks fell unexpectedly last week to their lowest level since October 2018, while fuel demand reached a new high. Oil prices rebounded after the data, reversing a downward trend sparked by the beginning of indirect nuclear talks between the US and Iran a day earlier.

Crude benchmarks touched seven-year highs earlier this week, owing to political worries and a healthy demand recovery from the coronavirus epidemic, which has kept stocks at fuel hubs across the world at multi-year lows. The Organization of Petroleum Exporting Countries stated on Thursday that if the global economy improves, global oil consumption may climb even faster this year. According to the article, OPEC missed a planned oil output increase in January as part of a deal with partners to gradually reverse record output curbs imposed in 2020.

Overall, tight crude oil supplies, poor storage, and near-peak global supply are driving up prices.