Key points
Equities: Mixed session, tech underperformance, financials gain, CPI anticipation
Volatility: VIX steady at 18.71, short-term risk elevated, CPI-driven moves expected
Digital Assets: Bitcoin $97,161 (+0.6%), Ethereum $3,231 (+0.1%), cautious ahead of CPI
Currencies: USD drops ahead of US CPI, JPY resurgent on fresh BoJ comments
Commodities: Crude and gold rebound, sugar slumps
Fixed Income: US Yield curve steepens ahead of CPI
Macro events: US CPI, Monthly Oil Market Reports from IEA and OPEC
Saxo’s Q1 2025 Quarterly Outlook is out, and can be accessed here
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Macro data and headlines
UK Dec. CPI out this morning came in at +2.5% Y/Y and +0.3% M/M versus 2.6% / +0.4% expected, respectively and 2.6% Y/Y in November. Core UK CPI rose 3.2% Y/Y vs. 3.4% expected and 3.5% in November. Services inflation moderated sharply to 4.4% vs. 4.8% expected and 5.0% in Nov.
US December PPI came in at 0.2% m/m, below the expected 0.4%. Core PPI m/m also came below at 0% vs 0.3% estimate. The year-on-year figure came in at 3.3%, below the 3.5% expected while the core figure was at 3.5% vs 3.8% expected.
Macro events (times in GMT)
December CPI from UK (0700), Sweden (0700), France (0745), and Spain (0800), Monthly Oil Market Reports from IEA (0900) and OPEC (Time unknown), US Jan Empire Manufacturing (1330), US Dec CPI (1330), US EIA’s Weekly Crude and Fuel Stock Report (1530)
Fed speakers today: Barkin (1420), Kashkari (1500), Williams (1600), and Goolsbee (1700)
Earnings events
· Wednesday: JPMorgan Chase, Wells Fargo, Goldman Sachs, Blackrock, Citigroup
· Thursday: Taiwan Semiconductor Manufacturing, Infosys, Bank of America, UnitedHealth, Morgan Stanley
· Friday: Schlumberger
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
· US: US futures edged higher on Wednesday ahead of the December CPI release, a key indicator for the Federal Reserve's monetary policy. Tuesday's session saw mixed results, with the S&P 500 rising 0.11%, the Dow gaining 0.52%, and the Nasdaq 100 down 0.23%. Lighter-than-expected PPI data provided some relief, lowering Treasury yields and boosting defensive sectors. However, tech and healthcare lagged. Investors remain cautious as major banks—JPMorgan, Citigroup, and Goldman Sachs—are set to report earnings today, potentially influencing broader market sentiment.
· Europe: European stocks rose on Tuesday, snapping a four-day losing streak as banks and tech shares supported gains. The STOXX 50 added 0.5%, while the STOXX 600 finished flat at 508 points. Banks such as Santander and BNP Paribas gained over 2%, while Adyen and Prosus lifted the tech sector. Energy stocks also rose on elevated crude prices, but healthcare and consumer defensive shares underperformed. Market focus remains on inflation and bond yields, with rising German bund yields adding pressure. Investors are awaiting U.S. inflation data for clues on Federal Reserve rate cuts.
· Asia: Asian equities saw mixed movements on Wednesday as investors remained cautious ahead of the U.S. CPI release. The Hang Seng Index rose 0.4%, extending its rebound with gains in tech and financial stocks, supported by optimism over China's recent policy measures. Mainland China's CSI 300 dipped 0.4% as traders anticipated additional economic stimulus. Meanwhile, Japan's Nikkei rose 0.3%, supported by gains in exporters. Regional markets remain sensitive to U.S. monetary policy, with expectations of limited Fed rate cuts keeping risk sentiment subdued.
Volatility
Volatility is on the rise as the market braces for today's CPI report. The VIX1D jumped 33% to 22.48, reflecting heightened short-term expectations of market movement, while the VIX settled at 18.71, down 2.5%. Options market activity was concentrated in financial ETFs such as XLF, hinting at nervousness ahead of major bank earnings. Expected moves for the S&P 500 and Nasdaq 100 are elevated at 64.09 points (~1.1%) and 292.35 points (~1.4%), respectively, underscoring the potential impact of upcoming economic data and earnings.
Digital Assets
Bitcoin climbed 0.62% to $97,161, recovering from a session low of $93,200 as bullish sentiment returned ahead of the U.S. CPI release. Ethereum gained 0.18% to $3,231, while XRP outperformed, surging 6.34% to $2.8365. Traders are closely monitoring inflation data, as higher-than-expected figures could dampen expectations for Federal Reserve rate cuts, potentially weighing on liquidity for risk assets like crypto. Altcoins showed mixed performance, with Solana rising 1.04% to $189.52. The market remains cautious but supported by dip-buying momentum.
Fixed Income
· Japan’s government bond yields jumped as BoJ governor Ueda was out overnight indicating a rate hike is in play at next Friday’s BoJ meeting. He also noted an encouraging outlook on worker pay. He said the outlook for the US economy and Japan’s spring wage negotiations remain important. The 2-year yield jumped to a fresh 16-year high at 0.70% as more than 18 basis points of hiking are now priced for the BoJ meeting next week.
· US Treasury yield curve saw renewed steepening on Tuesday after the front-end found support from lower-than-expected December PPI figures while yields rose further out the curve, with the 30-year yield touching 5% for a second time this week, before stabilizing.
Commodities
· Gold rose above $2,680, driven by weaker-than-expected U.S. PPI data ahead of today’s important inflation data, the result of which may help determine whether the Federal Reserve might continue its rate-cutting path.
· Copper futures rose to a new high for the year at $4.366, as China's copper imports surged 18% and exports exceeded expectations. This, coupled with China's economic support measures, and reports of gradual Trump tariffs.
· Sugar fell 3.2% to 18.2 cents per pound, the lowest since August, due to improved crop prospects in Brazil and potential oversupply concerns from China's trade policy and increased exports from India and Thailand, impacting global market dynamics.
· Crude futures rebounded with Brent trading back above $80, supported by sanctions angst, a potential eight weekly decline in US stockpiles and a cold northern hemisphere winter lifting demand for diesel and heating fuels. In focus today are monthly oil market reports from the IEA and OPEC, as well as EIA’s weekly crude and fuel stock report.
Currencies
· The US dollar weakened sharply yesterday in a follow-on reaction perhaps to the story that Trump’s team is considering a gradual approach to imposing tariffs, which helped to stabilize risk sentiment. The moderating PPI inflation release yesterday also added to the headwinds for the US dollar yesterday, although today’s CPI data point is far more critical for the greenback.
· The JPY pulled back higher yesterday after yesterday’s rally was reversed by a fresh rebound in global bond yields after BoJ Governor Ueda’s comments last night. USDJPY has been bottled up in the 156-159 range since surging in the wake of the FOMC meeting in December. Today’s US CPI and the direction of US treasury yields likely important coincident indicator for USDJPY.
· Sterling dropped to new local lows versus the euro yesterday even as it fought back higher from an intraday sell-off versus the US dollar. The EURGBP exchange rate has tested the important 0.8450 area.
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