Morning Bid: Investors look to next round of US data

By Thomson Reuters Mar 14, 2024 | 12:34 AM

A look at the day ahead in European and global markets from Rae Wee

Closely watched U.S. inflation data this week aroused little excitement in the market, but investors will have another chance to be inspired if Thursday’s producer prices and retail sales numbers offer fresh hints on the direction of Fed rate policy.

Expectations are for U.S. retail sales to have bounced back in February after a surprise drop at the start of the year, while the producer price index (PPI) for final demand is also forecast to show a steady increase for the month.

Both are critical data points, given that the PPI numbers feed into the Fed’s preferred inflation gauge and that retail sales account for nearly half of household consumption.

Consumer spending is by far the biggest driver of the U.S. economy, which seems still to be in solid shape – thus reducing the need for the world’s largest central bank to rush into cutting rates.

Futures pricing now shows a less than 10% chance of an easing cycle beginning in May, according to the CME FedWatch tool, although that could change very quickly as Fed expectations tend to swing from one data point to the next.

The bond market seemed to reflect bets for a higher-for-longer U.S. rates scenario, with the two-year Treasury yield notching a two-week high on Thursday. The dollar, however, was still largely on the back foot. [FRX/]

In Japan, bets that the central bank would soon exit its prolonged ultra-easy rate policy kept the Nikkei under pressure and on track for its worst weekly performance in three months.

Elsewhere, a Washington-based global trade association representing biotechnology companies is taking steps to “separate” from Chinese member Wuxi AppTec, its new CEO said in a letter, a sign of the fraught ties between the world’s two largest economies.

Shares of Wuxi AppTec in Hong Kong tumbled more than 9%, while its Shanghai shares fell 4.7%.

Key developments that could influence markets on Thursday:

– U.S. PPI (February)

– U.S. retail sales (February)

– ECB’s Isabel Schnabel, Pablo Hernandez de Cos speak

(By Rae Wee; Editing by Edmund Klamann)