US CPI revisions make no material change

The US Federal Reserve released its annual CPI revisions for 2023 on Friday. FOMC member Christopher Waller had recently flagged the release as something he would be watching for to get an indication of the path of inflation, and there were sizeable revisions when the exercise was carried out last year. However, in the end there was little material change to previous data releases for 2023. With the December print revised down by 0.1ppts, and the November and October prints revised up by the same degree, the annualised Q4 figure was revised up from 1.8% to 1.9%. This by and large confirms the disinflationary trend continued through the end of last year, ahead of the January CPI inflation release due tomorrow. Headline price growth is forecast at 0.2% m/m and 2.9% y/y, down from 3.4% y/y in December.

We also have UK inflation data for January due on Wednesday, with the consensus prediction for 4.2% y/y. BoE MPC member Jonathan Haskel told Reuters on Friday that he was looking for ‘more evidence on persistence’ in the disinflationary trend before he would support looser policy; he was one of two MPC members to vote for a rate hike at the February meeting.

IMF head Kristalina Georgieva spoke at the preamble to the World Governments Summit in Dubai over the weekend, where she commented on the outlook for global and regional economic growth. She confirmed the IMF’s 2024 global growth forecast at 3.1%, and 2.9% for the MENA region. Kristalina acknowledged the risks to growth stemming from the regional conflict, and urged countries to prepare for the impact of AI on employment over the coming years.

Today’s Economic Data and Events

16:00 India industrial production, December, % y/y. Forecast: 2.5%

16:00 India CPI inflation, January, % y/y. Forecast: 5.0%

Fixed Income

• Continued push back from Jerome Powell and other Fed officials around the likelihood of an imminent rate cut weighed on USTs last week, and yields picked up once more. The 2yr added 12bps over the week to close at 4.4799% on Friday, its highest close this year, while the 10yr added 16bps to 4.1754%, just shy of its 2024 high.

FX

• The dollar continued in its winning streak against its peers as the dollar index ended the week 0.2% higher against its basket and has now gained 2.8% ytd.
• There were significant gains against the Japanese yen which lost 0.6% over the week to close at 149.29, but the other majors held up better, with GBP closing all but flat over the week at 1.2628 and EUR similarly little changed at 1.0874.

Equities

• It was a good week for East Asian equity markets last week. In Japan, a weaker yen and ongoing accommodative policy helped drive the Nikkei to a 34-year high, up 2.7% w/w (although it remains off its all-time high still). Chinese equities also had a solid week ahead of the New Year celebrations; the Shanghai Composite added 3.4% w/w at its close on Thursday.
• The S&P 500 also had a good week as it broached the 5,000 mark for the first time on a fifth straight week of gains. At the close of Friday the index was up 1.4% w/w. The NASDAQ closed up 2.3% over the week, but the Dow Jones closed flat.
• Within the wider region, Saudi Arabia’s Tadawul closed up 2.4% over the week at its Thursday close, while Egypt’s EGX 30 closed down 0.8% w/w. Locally, both benchmark indices ended Friday lower, with the ADX falling 1.2% w/w and the DFM ending down 1.1%.

Commodities

• Oil markets capped a strong week with further gains on Friday as geopolitical tensions continued to outweigh any demand concerns. Brent futures ended Friday up 0.6% on the day to close at USD 82.2/b, while WTI added 0.8% to USD 76.8/b. Both benchmarks were up over 6% over the week.