Daily summary: US PPI inflation data weigh on market sentiment

• European indices finished today's session higher, however erased majority of early gains after hotter-than-expected US PPI reading pointed that the price pressures remain elevated. Dax rose 0.18%, CAC40 finished 0.89% higher after touching an intraday record of 7,387 earlier in the day, while FTSE 100 jumped above the 8,000 mark to notch a fresh record closing high, driven by gains in the technology, energy, and materials sectors.

• ECB's Lane said much of the ultimate inflation impact of our measures is still in the pipeline. As a result of the tightening, inflation is expected to be 1.2% lower in 2023 and 1.8% points lower in 2024.

• Futures linked to major Wall Street indexes fell sharply after publication of latest PPI data and FED's Mester comments. However Wall Street bulls managed to erase some of the losses later in the session

• The producer price index, a gauge of prices for final demand products, rose 0.7% over the previous month in January, the most since June 2022, while analysts expected a modest 0.4% gain.

• Fed's Mester said more upside inflation surprises could make Fed policy more aggressive. She also revealed at the most recent FOMC meeting, there was a compelling case for a 50 basis point increase. Fed rates must rise above 5% and remain there for an extended period of time. There is no need to cut rates this year and the main focus is now on raising rates.

• Fed's Bullard believes that continued rate hikes would lock in slower inflation. In his opinion market-based inflation expectations are now relatively low, while the economy is growing faster than previously thought, unemployment is lower than expected, and output is above potential.

• Downbeat moods prevail on the energy commodities market - WTI is trading 0.80% lower and Brent fell over 1.0%. Natgas price dropped 3.0% and hovers near 2-yers lows, as mild weather has been keeping heating demand low and stockpiles above usual levels. The latest EIA data showed US utilities pulled 100 bcf of gas from storage last week, less than market expectations of a 109 bcf drop. That compares with a decrease of 195 bcf in the same week last year and a 5-year average decline of 166 bcf.

• Dollar strengthened after the latest data from the US, however gave back some gains in the afternoon. EURUSD pair once again managed to defend the key support zone around 1.0660.

• Stronger dollar put pressure on the precious metals during the European session, however moods reversed after the US open. Gold bounced off major support at $1830, while silver climbed back above the $21.50 mark.

• Upbeat moods prevail on the cryptocurrency market. Bitcoin tested $25,000 mark the highest since August, while Ethereum jumped above $1715 with investors ditching altcoins in favor of bitcoin amid fears of a regulatory crackdown. 

Release of the PPI figures sparked sell-off on Wall Street, however the declines slowed down in the evening. US500 once again defends a key support zone at 4100 points. Source: xStation5