Daily summary: Wall Street wipes out most of post-CPI gains

• European indices rose sharply on Tuesday with DAX 40 surging 2.51% to around 14,480 points, driven by gains in the real estate, technology, energy sectors and upbeat data from the US and Germany where investor morale hit a 10-month high in December. 

• Major Wall Street indices also enjoyed a wave of bullish momentum early in the session as the US inflation rate slowed for a fifth consecutive month to 7.1%, while markets had forecast a smaller decrease to 7.3%, while core CPI fell to 6.0%.

• However US indexes erased a large chunk of the early gains in the evening, nevertheless Dow Jones is still trading 0.20% higher, while S&P500 and Nasdaq rose  0.60% and 0.85%.

• Futures indicate that traders see a growing likelihood of a 25 bp Fed hike in February and 50 bp hike during tomorrow’s FOMC meeting. 

• Tesla's market value dropped below $500 billion.

•  The upward movement on Wall Street came along with a sharp depreciation of the dollar and softening Treasury yields. EURUSD pair jumped to resistance at 1.0665, a level not seen since June2022, while the dollar index extended losses and fell more than 1% to below 104, the lowest level in six months. Currently AUD and JPY are the best performing currencies while CAD and USD lag the most.

• Weaker dollar support precious metal prices. Gold pulled back slightly after testing local resistance at $1825, while silver briefly broke above $24.00 level. 

• Oil price rose around 3.5%, extending yesterday gains as investors digested latest OPEC projections and rising number of infections in China. The cartel expects world oil demand growth in 2022 to remain at 2.5 million bpd and at 2.2 million bpd per year to average 101.8 million bpd in 2023. However the group warned that demand may take a hit in the first quarter of 2023 and a lot will depend on the successful containment of COVID-19 in China. 

• NATGAS prices jumped over 6.0% during today's session as fresh weather forecasts point to much lower temperatures during the holiday period in the US, which should increase demand for gas.

• Major cryptocurrencies also benefited from the risk on sentiment. Bitcoin climbed above the $17700 level while Ethereum oscillates around $1315. Even troubled Binancecoin managed to bounce back from key support at $254.25 and erased most of early losses.

US500 rose sharply after publication of the US inflation data and set a new local high at 4137 pts. Nevertheless, bullish momentum faded away very quickly and the index retreated towards the psychological support at 4000 pts. If sellers manage to push index lower, then downward move may test next support at 3925 pts, which is marked with previous price reactions, the lower limit of the 1:1 structure and the 50% Fibonacci retracement. Source: xStation5