Let the dust settle

Nothing is ever certain in finance and yesterday's session was a good illustration of this. Investors were waiting for the January inflation figures in the US to adjust their strategies, with two dominant and probably a bit simplistic scenarios. Well, it's a bit easy to say after the fact, but it comes down to this. Either inflation continues to fall without too many bumps in the road, allowing the bullish party to continue. Or inflation continues to bite a little too hard and the equity markets take the hit. That's the theory. In practice, inflation figures have been a little more worrying than expected, and equity markets have been rising. Well, rather disparate performances, but still a gain of 0.7% for the Nasdaq, the index most sensitive to the path of monetary policy, and therefore to the indications provided by inflation. The Nasdaq fluctuated a lot, but ended up almost at its highs for the session. It should be noted that it was not imitated by the Dow Jones (-0.46%) and that the S&P500 failed to rise (-0.03%). The same confusion in Europe with small increases in Paris, London and Zurich and slight decreases in Frankfurt, Stockholm and Brussels.

Consumer prices in the United States rose as expected between December and January, mainly due to seasonal factors. At this point, the financial community seems to view this as a minor blip on the road to a decline in price increases. In a sense, the statistic has not invalidated the prevailing narrative that the Fed is near the end of its rate hike cycle. But it probably added some weight to the theory that rates will remain at their current high level for longer than the markets currently expect.. However, this does not necessarily upset investors, who fear uncertainty about the path of rates more than rates themselves... especially as they approach the peak. The bond market, which is more subtle than the stock market when it comes to making monetary predictions, became a little tense yesterday on the announcement of US inflation, but without excess. The yield on 10-year U.S. debt rose to 3.74%, which is almost a non-event.

In other news, Joe Biden has named, as rumors suggested, Fed Vice Chair Lael Brainard as his chief economic advisor. She is therefore leaving the central bank. The litany of corporate results continues with since yesterday evening the figures of Carrefour, Vinci, Airbnb, Kering, Nexans, Heineken, Barclays, Ahold Delhaize and many other listed companies. The session will also be marked by a new series of macroeconomic indicators in the United States, which will refine the reading of inflation from the previous day. In particular, we will have to follow the January retail sales at 8:30 am. In China, the central bank left its one-year rate unchanged while injecting liquidity to meet increased demand for financing. Strangely, the Chinese recovery has been off the radar for a few days, even though it was a driving force behind the awakening of the equity markets.

In Asia Pacific this morning, we are more cautious than in the United States. The Nikkei 225 is down 0.37% in Japan, while the Korean KOSPI is down a hefty 1.53%. Even the Australian ASX200 index is down more than 1%. China is also doing poorly, especially the Hang Seng, which is down 1.3% and is now down more than 10% from its January peak. Regularly against the tide, India grabs a few points.

Economic highlights of the day: