U.S. Inflation Data Sparks Market Turbulence: Interest Rate Cut Expectations Dampened

Global markets experienced a downturn , with most Asia-Pacific markets falling, except for Hong Kong, following the release of hotter-than-expected U.S. inflation data that had sent Wall Street into a tumble overnight.

The U.S. Consumer Price Index (CPI) reported a 3.1% increase on a 12-month basis and a 0.3% rise for the month. Economists surveyed by Dow Jones had anticipated a 0.2% month-over-month increase in January and a 2.9% rise on an annual basis.

Core prices, excluding volatile food and energy components, saw a 0.4% increase month over month and a 3.9% rise from a year ago. Projections for core CPI had been for a 0.3% increase in January and a 3.7% rise from a year earlier.

Despite the wider market downturn, Hong Kong’s Hang Seng index managed to reverse its losses, gaining 0.36% as the city resumed trading following the Lunar New Year holiday.

However, mainland Chinese markets remained closed for the week. In New York, global stock market indexes declined, with the 10-year U.S. Treasury yield reaching a 2-1/2-month high, and the dollar touching a three-month peak against the yen. This followed the release of U.S. inflation data that showed inflation slowing less than expected in January

The consumer price index rose 0.3% last month after a 0.2% gain in December, according to the Labor Department’s Bureau of Labor Statistics. Economists had forecast a 0.2% increase for the month and a 2.9% year-on-year rise.

The benchmark U.S. 10-year Treasury note yield rose 14 basis points to 4.31%, reaching its highest level since December 1. Meanwhile, the dollar strengthened to 150.88 yen, its highest level since November, before settling at 150.75 yen, up 0.9%.

The dollar index also reached a three-month high, rising 0.68% to 104.86, while the euro fell 0.58% to 1.0709. In the cryptocurrency market, bitcoin reached its highest level since December 2021 at $50,383 before dropping to $49,545.00, down 0.58%.

In the commodities market, oil prices rose amid continued tensions in the Middle East and eastern Europe. Brent futures settled 77 cents higher at $82.77 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 95 cents to settle at $77.87.

However, gold prices fell below the key $2,000 per ounce level to a two-month low following the CPI data. Spot gold was down 1.3% at $1,993.29 an ounce, its lowest since December 13.