Daily summary: Wall Street climbs as inflation eases grip on economy

• CPI inflation in the US slowed down to 6.5% y/y as expected in December. However for the first time since the beginning of the pandemic, headline inflation fell on an annual basis.

• Core inflation dropped to 5.7% y/y also in line with market estimates, but at the same time rose by 0.3% m/m 

• US initial unemployment claims unexpectedly fell to a three-month low last week, pointing to a tight labor market. 

• Inflation continues to ease, which the Fed is noticing. Harker points out that at the next meeting scale of hikes could be reduced to 25 bp

• Bullard remains hawkish and would like to see interest rates above 5.0% in order to avoid a repeat of the 1970s scenario

• The market reacts primarily to comments from the policymakers and Fed-funds futures reflect a 93.2% probability the FOMC will raise rates by 25 bp during its February meeting.

• EURUSD broke above 1.0850 mark ang gains nearly 1.0%, while USDJPY fell over 2.50% to 129.00 level thanks to reports in Japanese media that suggested Bank of Japan is planning to review side effects of its loose monetary policy at a meeting next week. Markets took it as another sign that BoJ is about to scale back its dovish approach.

• US indices swung wildly after publication of inflation data as the market was hoping for a stronger drop. Nevertheless buyers took control in the afternoon, and currently Dow Jones is trading 0.65% higher, while Nasdaq rose 0.50%. The Russell 2000 is up over 1.6% and the S&P 500 gains 0.50% and managed to break above 4,000 points.

• European equities finished today's session higher, with DAX closed above 15,050, the highest in eleven months. 

• Gold topped $1,900 an ounce today, while dollar weakened against majority of G10 currencies

• Cryptocurrencies also moved sharply higher. Bitcoins gained over 6.0% and approaches $18800 level, while Ethereum broke above $1400 level.

• Crude oil extends yesterday’s gains and reached highest level since January 3rd, on the news that US strategic reserves will not be sold to China and the DOE will try to rebuild them in the near future

• Natural gas rebounded today despite an increase in US gas inventories, which is an anomaly during the winter period. Weather forecasts continue to point to high temperatures for the coming weeks

• Latest WASDE report downwardly revised global soybean production as lower output in Argentina and Uruguay offset the expected increase in China. Wheat supply has been revised upwards for the current marketing year amid stronger production in Ukraine and the European Union. Following the publication soybean gains 0.90% and wheat rose 0.35%.

SILVER rose over 3.0% on Thursday, however buyers still struggle to break above the major resistance zone around $24.00 per ounce. Source: xStation5