US producer prices rise by less than expected in December

US producer price inflation for final demand rose 0.2% m/m in December, lower than the 0.4% m/m gain in November. The outturn was also lower than consensus expectations for another 0.4% m/m change. The weaker-than-expected print was in part driven by a 0.1% m/m decline in food prices and flat service prices. On an annual basis PPI rose 3.3% from 3% in November. While the headline figure is encouraging, several components of PPI that feed into the Feds preferred PCE inflation measure, did tick up in December. In particular, the airfares sub-component of PPI saw the biggest jump since early 2022.

The UAE and Malaysia yesterday signed a memorandum of understanding which is intended to enhance technological collaboration and joint investments in artificial intelligence. The memorandum builds on the conclusion of negotiations on a Comprehensive Economic Partnership Agreement (CEPA) between the two countries last October.

Today’s Economic Data and Events

• 11:00 UK CPI (Dec). Forecast: 2.6% y/y
• 14:00 EC Industrial production (Nov). Forecast: 0.2% m/m
• 17:30 US CPI (Dec). Forecast: 2.9% y/y

Fixed Income

• Moves in US treasuries were mixed on Tuesday, following the PPI print. The 2yr yield fell 1bps to 4.3668%, while the 10yr yield rose 1.5bps to close at 4.7924%.
• European bond yields saw broad-based gains on Tuesday. The 10yr Bund yield gained 4bps to 2.650%. The rise in the 10yr UK Gilt yield moderated, rising by less than 1bps to reach 4.888%.

FX

• The dollar spot index fell against major peers on Wednesday, dropping 0.6%, after 5 consecutive days of gains. EURUSD rose 0.6% to 1.0308 and GBPUSD gained 0.11% to 1.2215. USDJPY, in contrast, gained 0.3% to 157.96.
• Commodity currencies were stronger against the dollar on the day. AUDUSD gained 0.3% to 0.6195, NZDUSD rose by 0.37% to 0.5604, and USDCAD fell 0.21% to 1.4349.

Equities

• Moves in major US equity markets were once again mixed on Tuesday, with investors waiting for the release of CPI and bank earnings data on Wednesday. The Dow Jones gained 0.52% and the S&P 500 rose 0.1%. The NASDAQ fell, dropping 0.2% on the day, with tech stocks falling.
• European equity markets were generally higher on Tuesday. The Eurostoxx 50 rose 0.5%, the CAC 40 gained 0.2%, and the DAX increased by 0.7%. The FTSE 100 was the outlier, dropping 0.3%.
• Locally, the ADX rose 0.5% while the DFM gained 0.25%. The Tadawul rose 0.5%.

Commodities

• Oil markets fell on Tuesday, with geo-political tensions moderating and a report from the API pointing to continued excess supply in 2025. Brent futures fell 1.35% to reach USD 79.92/b, while WTI dropped by 1.67% to USD 77.5/b. Prices have however ticked higher in early morning trade.