The US is due to release inflation data on February 14, coinciding with Valentine's Day
Market analysts will be closely looking ahead for a crucial set of data to be released on Valentine's Day: US inflation. Asian markets were trading mixed today ahead of the release of US inflation data. Overnight, the Dow Jones industrial average had ended up a slim 0.16 per cent, while the S&P 500 gained 0.26 per cent and the Nasdaq 0.45 per cent. Why is the market jittery over US inflation data? The recent selloff in global markets, which pushed Dow into correction territory, could be attributed to US jobs data for the month of January, which showed a higher-than-expected acceleration in wage growth.
This fuelled fear about inflation rising faster than expected and the Federal Reserve could hike interest rate at a faster-than-expected pace. This led to sharp increase in stock market volatility across the globe.
Headline consumer price inflation in the US is forecast to slow to an annual 1.9 per cent and core inflation to 1.7 per cent, an outcome that could help calm nerves. The concern is the figures could surprise on the high side as wages did a couple of weeks ago.
"The risk seems asymmetric to me," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader. "Even a slightly higher number could set the cat among the pigeons given the late cycle stimulus the Trump Administration is pumping into the US economy."
BofA-Merrill Lynch's February Fund Manager Survey found a record one-month jump in the net percentage of investors taking out protection against a sharp fall in equity markets. Funds were rotating into cash and out of equities, reducing their stock allocation to a net 43 per cent overweight, from 55 per cent, the largest one-month decline in two years.(With Reuters inputs)