Markets deflated after data miss

US equity markets move sideways

Another relatively flat session on Wednesday, with stock markets running out of steam a little after an impressive run over the prior week.

We’ve seen plenty more optimism in these markets recently. Covid numbers are finally improving, the vaccine rollout is making good progress and we’re heading towards a strong recovery period that investors are increasingly optimistic about.

Stock markets have had a minor wobble at the start of the year, as you’d expect under the circumstances, but they’re recovering well. This week it’s all a little flat, with the thin data flow and lack of many other notable events. Earnings season is past its peak, although there are still some notable reports.

The main data release today was US CPI which fell a little short of expectations. Fears of a post-Covid spike will not change as a result of these figures but it may just be a case that another month without inflationary pressures is welcomed with a sigh of relief. We saw some positive movement in US futures after the release but that was quickly reversed.

While the headline figure catches the eye, the Fed will be far more concerned with what is causing any spike in inflation and how permanent it is. It will be hesitant to react in a knee-jerk manner at a time when the economy needs all of the support it can get and the tweaks to its mandate will allow for that, as long as the desire to do so remains on the policy committee.

In the interim, investors may continue to get a little nervous if inflation does test the Fed’s nerve this year and taper tantrum fears could return. The central bank has been keen to play down these risks but I imagine they’ll be called upon over and over again in the coming year.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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