CPI data may delay rate cuts, UK slight employment growth
CPI up 3.1% and US stocks fall on inflation worries, delays rate cut. Switzerland CPI rises 0.2%. UK sees modest job growth.
Switzerland CPI data
The Swiss consumer price index (CPI) edged up by 0.2% compared to the previous month, reaching 106.4 points, attributed to escalating prices for electricity, hotels, and car insurances. Nevertheless, air transport costs and prices for clothing and footwear experienced a decline, partly due to seasonal sales. Inflation surged by 1.3% year-on-year, according to the Swiss Federal Statistical Office (FSO).
United Kingdom
Payrolled employees in the UK increased by 31,000 between November and December 2023, reflecting a modest growth of 0.1%. However, the annual growth rate of payrolled employees has slightly decelerated, reaching 1.3% between December 2022 and December 2023. An early estimate for January 2024 indicated a provisional increase of 48,000 employees (0.2% month-on-month), reaching a total of 30.4 million, though subject to potential revisions pending additional data.
United States
U.S. stocks experienced a notable downturn following the release of worse-than-expected inflation data, fueling uncertainty regarding anticipated interest rate cuts by the Federal Reserve. The S&P 500 plummeted by 1.3% in early trading, reflecting investors’ revised expectations for the timing of rate cuts, potentially delaying until June. Similarly, the Dow Jones Industrial Average dropped by 1.1%, while the Nasdaq composite fell by 1.8%, adversely impacting high-growth stocks such as technology companies.
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U.S. Consumer Price Index (CPI) Report
The January U.S. CPI report revealed a reacceleration in consumer price growth, surpassing economists’ forecasts. CPI surged by 0.3% from the prior month, marking an increase from December, while annual inflation stood at 3.1%, slightly lower than the preceding month. Notably, core prices, excluding energy and food, remained at a growth rate of 3.9% year-on-year.
Main movers
The upsurge was primarily driven by shelter costs and other services, posing challenges to market expectations for a potential rate cut in May. The supercore CPI measure also indicated a reacceleration, further dampening prospects for an imminent rate adjustment.
Market Response after surveys
The release of the CPI report triggered a significant market response, with treasuries witnessing a sell-off as traders postponed estimates for the commencement of Fed rate cuts, shifting expectations to July from June. Two-year yields surged by 12 basis points, reaching 4.59%, while stock futures plummeted by 1.4%. Concurrently, the U.S. dollar strengthened against major currencies, breaching the 150 yen mark, underscoring prevailing market uncertainties surrounding inflationary pressures and monetary policy adjustments.
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