Retail sales, PPI, Microsoft job cuts, IEA oil warning

By Geoffrey Smith

Investing.com — The United States releases retail sales and producer prices data for December, which could boost or boost hopes of a reversal from the Federal Reserve. The Bank of Japan is refusing to budge, despite all bets that it will be forced to lower the limit on bond yields. The Bank of England is also under pressure to tighten after strong inflation data in December. {Microsoft is expected to announce a number of job cuts, with companies PNC Financial and JB Hunt reporting the results. Oil hit its highest level in more than a month on forecasts that the global market will face a major supply shortage by the end of the year. Here’s what you need to know in the financial markets on Wednesday, January 18.

1. Retail sales and PPI will reinforce the Fed’s core story

The United States releases data for December at 2:30 p.m. in the latest test of the American consumer’s ability to continue spending despite the economic slowdown.

Analysts expect a 0.8% drop in sales value, which would lead to a slightly smaller drop in sales volume given the 0.1% drop in consumer prices last month.

There will also be US inflation data for December, where a 0.1% decline is expected. If confirmed, the PPI would hit an 18-month low, confirming that the expansion in profit margins that fueled inflation during the pandemic is quickly reversing.

2. There is no word for “pivot” in Japanese

It kept monetary policy unchanged, defying expectations for an easing of long-term bond interest rates.

Financial markets were betting heavily on the BoJ abandoning its yield curve control policy, and the decision led to a rapid unwinding of speculative positions in the yen, whose ultra-low interest rate has made it the funding currency of choice for many rate-based transactions.

The dollar rose as much as 2% against the BoJ after the BoJ decisions, but then gave up more than half of its gains to trade 0.9% at 1:15 p.m. This suggests the market is still eager to test the BoJ’s decision to maintain a 0.5% ceiling on Japan’s 10-year bond yields. The BoJ spent more than $260 billion in December to keep yields low and now owns more than half of the entire JGB market.

3. Stocks should open slightly higher than retail; Microsoft is expected to announce job cuts

US stock markets are expected to open slightly higher, but futures are unconvincing ahead of the retail sales report.

As of 1:15 p.m., prices were up 22 points, or less than 0.1%, up 0.1% and 0.2%. Major currency indexes had a mixed day on Tuesday, with weak results from Goldman Sachs (NYSE: ) dragging the index down nearly 400 points.

Among the stocks that will come under scrutiny later is Microsoft (NASDAQ: ), which will reportedly announce a series of job cuts later in the day. In the third quarter, the Redmond giant recorded the weakest growth in turnover in the last five years. Its fourth quarter results are expected next week.

results Charles Schwab (NYSE:) Prologis (NYSE:), PNC Financial (NYSE:) and JB Hunt (NASDAQ:), among others, are expected later.

4. BoE is under pressure to continue hikes after strong CPI data

Inflation in the UK hit a seven-month high after remaining stubbornly above single digits in December, putting pressure on the Bank of England to keep interest rates on hold.

Headline inflation remained at 10.5%, food and service prices continued to rise sharply. The figures confirm anecdotal reports from the retail sector that costs remain high despite falling living costs.

In contrast, the euro fell after a Bloomberg report suggested several European Central Bank policymakers were considering slowing the pace of interest rate hikes after their next meeting in February. Banque de France governor Francois Villeroy de Galhau warned that the 50-basis-point rate hike in February remains unchanged.

5. Oil Hits Six-Week High After Part of IEA Forecasts; API reserves are pending

Crude oil prices hit their highest level in more than a month after the International Energy Agency predicted a sharp shift in the balance between global supply and demand later this month.

The IEA is forecasting a surplus of about 1 million bpd in the first quarter of the year, falling to a deficit of 1.6 million bpd in the third quarter, widening to 2.4 million bpd by the end of the year. record global oil supply.

At 1:20 p.m., futures were up 1.9% at $82.00 a barrel, up 1.6% at $87.33 a barrel. The American Petroleum Institute’s weekly data on US inventories is due at 10:30 p.m.