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Today's Markets: Stocks edge higher, FOMC minutes ahead

European stocks markets green across the board to start Wednesday, and new inflationary data for the UK
February 16, 2022

Green across the board: European stock market rallied again on Wednesday after a decent handover from Asia overnight followed the first positive day in four on Wall Street. Stocks are recovering as Russia’s public stance over Ukraine appeared to ease immediate invasion fears, whilst Nato’s secretary general said there were grounds for cautious optimism. Earlier on Tuesday headlines indicated some Russian troops near the border were returning to base, fueling hopes of de-escalation. The West says they have not been able to confirm anything. Situation still fluid and markets liable for substantial headline risk.

The FTSE 100 was mildly higher at 7,630, while shares in Frankfurt and Paris rose by around 0.7 per cent. Overnight, Asian stock markets notched broad gains. Wall Street snapped a three-day losing streak with the Nasdaq rallying 2.5 per cent and the S&P 500 up by almost 1.6 per cent to recover the 200-dma. The rally stops it from sinking to the Jan lows but now see 50-dma around 4,600 as the major test – twice failed there already this month. 

With risk bid, the dollar eased back against peers a touch in early trade. EURUSD rose to 1.1380, the highest since last Friday. GBPUSD rose this morning but remains well anchored in the February range. Gold continues to bounce around the $1,850 level. Oil recaptured some of the losses that saw crude prices declined 3 per cent on Tuesday.  

UK inflation rose to 5.5 per cent, ahead of the 5.4 per cent expected and the highest since 1992. Gilt yield spread further narrowing with 2s10s to around just 40bps. Pressure on the Bank of England to raise rates but not any more than we have seen. The BoE has already said it thinks CPI inflation will hit 7 per cent in the current cycle, peaking in April.

On Tuesday US PPI printed +1 per cent month-on-month, core +0.8 per cent; up 9.7 per cent year-on-year, or +8.3 per cent for the core reading, equaling last month’s series high. No let up... but the front end of the curve didn’t move much, 10s up to 2.05 per cent this morning, the highest since July 2019. Heineken the latest corporate to warn on soaring cost inflation, which it says will lead to higher beer prices – SAD!

FOMC minutes this evening (19:00 GMT) should give a steer on Fed thinking but the Bullard curveball and recent data has maybe turned this into outdated thinking. US retail sales due at 13:30 GMT, industrial production numbers at 14:15. US EIA crude oil inventories at 15:30 after API showed a draw of 1m barrels last week. 

Neil Wilson is the Chief Market Analyst at markets.com