U.S. and Global Financial Markets Stay Near Record Highs Despite Accelerating Inflation

Alexander Garcia
12 Feb, 2025
New York City

Benchmark indexes struggled to advance on Wall Street after hotter-than-expected inflation raised prospects of the Fed delaying its rate cut in the near future. 

The S&P 500 index decreased 0.3%, and the Nasdaq Composite declined 0.1% after consumer price inflation was hotter than expected. 

Consumer price inflation accelerated to an annual pace of 3.0% in January from 2.9% in December, the U.S. Bureau of Labor Statistics reported Wednesday. 

On a monthly basis, January's consumer price index advanced 0.5%, confirming that inflationary forces are far from tamed.

Core inflation, which excludes food and energy prices, increased 0.4% from the previous month and advanced at an annual pace of 3.3%.

Consumer price inflation is largely driven by the sustained increase in shelter costs, which accounted for 30% of the increase, and advanced at a slower annual pace of 4.4% from 4.6% in the previous month.

Moreover, fuel prices rose at an annual pace of 1%, compared to a decline of 0.5% in December, and rose for the first time in six months. 

Rising prices of fuel, food, and used vehicles make it less likely that the Fed will lower rates anytime soon. 

Investors are awaiting the release of producer price inflation later in the week. 

On Wednesday, Federal Reserve Chairman Jerome Powell, in answering a question from a member of the House Financial Services Committee, said a better measure of inflation would be the PCE Price Index than the CPI, which takes into account consumer behavior. 

On Tuesday, Fed Chair Powell confirmed while appearing in front of the Senate Banking Committee that the U.S. economy is on solid footing and labor market conditions are favorable and strong, and the central bank is in no hurry to increase rates in the near future. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.3% to 6,052.17, the Nasdaq Composite edged down 0.1% to 19,642.47, and the Russell 2000 index was down 1.1% to 2,250.32.

The yield on 2-year Treasury notes edged higher to 4.37%, 10-year Treasury notes increased to 4.65%, and 30-year Treasury bonds advanced to 4.85%.

WTI crude oil decreased $1.12 to $72.18 a barrel, and natural gas prices edged higher by $0.04 to $3.56 a thermal unit.

Gold decreased by $8.96 to 2,890.23 an ounce, and silver edged up by $0.15 to $31.98.

The dollar index, which weighs the US currency against a basket of foreign currencies, increased 0.43 to 108.35 and traded at a two-year high.

 

U.S. Stock Movers 

CVS Health Corp. jumped 9.2% to $60.10 after the pharmacy chain operator's fourth quarter results surpassed market expectations. 

Super Micro Computer jumped 9.2% to $42.16 after the custom server builder said that the company is on track to file its delayed annual report by February 25. 

The company lowered its annual revenue estimate range to between $23.5 billion and $25 billion.

Upstart Holdings Inc. soared 20% to $81.10 after the consumer lending platform operator reported better-than-expected results in the fourth quarter. 

The company guided revenue in the first quarter to exceed $200 million, surpassing expectations of $195 million set by some analysts.

Marriott International declined 1% to $285.45 after the company reported weaker-than-expected earnings per share in the latest quarter. 

 

European Markets Hovered Near Record Highs; Heineken, Siemens Energy In Focus 

Stock market indexes in Europe advanced, and investors reacted to the latest earnings results. 

Benchmark indexes in Frankfurt and London hovered at new record highs, and indexes in Paris and Milan edged higher in active trading.

Investors retained positive bias despite the region's weak macroeconomic outlook as corporate results continue to show improvements. 

However, investors worried that the ongoing slowdown in China's economy and the widening tariff war launched by the U.S. could negatively impact corporate results in 2025.

For now, investors bid up stocks in the hopes that the European Central Bank will deliver additional rate cuts and Chinese leadership will implement previously announced fiscal stimulus measures to revive the property market and economic growth. 

Closer to home, the largest economy in the eurozone, Germany, is struggling to expand its exports amid growing competition from China and tariff headwinds in the U.S. 

Germany's gross domestic product is likely to register less than a 0.5% increase in 2025, as consumers battle with high prices, stagnant wages, and elevated interest rates. 

 

Europe Indexes and Yields

The DAX index increased by 0.34% to 22,112.72, the CAC-40 index edged higher 0.23% to 8,047.42, and the FTSE 100 index advanced by 0.07% to 8,783.89. 

The yield on 10-year German bonds inched higher to 2.44%, French bonds increased to 3.16%, the UK gilts moved up to 4.60%, and Italian bonds edged higher to 3.53%.

The euro increased to $1.04; the British pound was lower at $1.24; and the U.S. dollar was lower and traded at 91.04 Swiss cents.

Brent crude decreased $0.78 to $76.21 a barrel, and the Dutch TTF natural gas was higher by €0.17 to €49.91 per MWh.

 

Europe Stock Movers

ABN AMRO Bank NV gained 6% to €17.50 after the Dutch lender's fourth quarter profit surpassed market expectations. 

Banco BPM SpA increased 0.6% to €8.97 after the Italian lender posted strong fourth quarter results and lifted its targeted profit and payout ratio to investors.

Kering SA advanced 4% to €258.10 and extended its two-day gain to over 10% after the Paris-based luxury fashion group reported better-than-expected financial results. 

Heineken NV jumped 12.2% to €76.46 after the Dutch brewing company reported a 7.3% increase in net income and announced a two-year stock repurchase plan. 

The alcoholic beverage company said net profit advanced 7.3% to €2.7 billion, driven by a 1.6% increase in beer sales volume. 

The company said it plans to repurchase its own stock worth €1.5 billion over the next two years.

Siemens Energy advanced 1.3% to €58.0 after the wind turbine and gas and power equipment maker reported a decline in net profit in the fiscal first half, but the order book swelled to €131 billion. 

TeamViewer SE jumped 5.3% to €12.47 after the remote access and support software company said profit in the fourth quarter increased because of an increase in revenue and subscribers. 

Baratt Redrow jumped 4.8% to 458.30 pence after the UK-based home builder estimated annual earnings closer to the upper end of the market estimate. 

Revenue in the fiscal first half ending in December rose 23% to £2.3 billion from £1.9 billion, net profit before tax increased 23% to £117.2 million from £95.2 million, and basic earnings per share decreased 18.3% to 5.8 pence from 7.1 pence a year ago.

The residential construction company completed 6,846 homes, 10.9% higher than 6,171 homes in the corresponding period a year ago. 

The home builder launched a £50 million stock repurchase plan starting in February and ending no later than June 30. 

 

Japan Indexes Edged Higher, Machine Tool Orders Advanced 

Investors bid up stocks in Tokyo trading following positive earnings from leading corporations. 

The Nikkei 225 increased 0.5%, and the broader TOPIX edged up a fraction after investors returned from a holiday. 

Market sentiment was positive after Fujikura and SoftBank reported financial results. 

The yen weakened to 153.75 against the U.S. dollar after Bank of Japan Governor Kazuo Ueda did not clarify the future rate path in a presentation to lawmakers. 

Investors remained cautious amid rising trade tensions with the U.S., and Trade Minister Yoji Muto formally requested exemption from the latest 25% tariffs on steel and aluminum products scheduled to go into effect on March 4.

On the economic front, machine tool orders increased 4.7% to 116.2 billion yen in January, slowing from an 11.2% increase in December. 

Orders advanced for the fourth consecutive month, as foreign orders increased 4.7% to 84.2 billion yen and domestic orders gained 4.5% to 31.99 billion yen.

The monthly data were released by the Japan Machine Tool Builders' Association on Wednesday. 

 

Japan Indexes and Stocks

The Nikkei 225 Stock Average increased 0.5% to 38,963.70, and the broader TOPIX advanced a fraction to 2,733.33. 

Fujikura Ltd soared 10.4% to ¥7,366.0 after the electric equipment company reported strong financial results for the nine-month period ending in December. 

Revenue increased 18.7% to 711 billion yen, ordinary profit soared 85.8% to 95.8 billion yen, and diluted earnings per share rose to 214.20 yen from 129.79 yen a year ago. 

For the third quarter, sales increased 27% to 267.5 billion yen, and net income advanced to 30.4 billion yen from 10.6 billion yen a year ago. 

The company raised its full-year revenue forecast to 940 billion yen from 880 billion yen and net income to 74 billion yen compared to 62 billion yen estimated earlier, respectively.

SoftBank advanced 3.8% to ¥9,856.0 after the company released its nine-month financial results.

Revenue in the nine-month period ending in December increased 6% to 5.3 trillion yen, net income swung to a profit of 1.05 trillion yen from a loss of 119.7 billion yen, and diluted earnings per share advanced to an income of 425.30 yen compared to a loss of 328.78 yen a year ago.

The results included investment gains of 2.2 trillion yen compared to a loss of 538.9 billion yen in the previous year's period. 

 

Hong Kong Index Trades at One-Month High After China Investors Increase Exposure 

Stock market indexes in China and Hong Kong extended gains, and investors piled into leading technology companies. 

The Hang Seng index jumped nearly 2%, and the CSI 300 index advanced a fraction as mainland China investors increased their leading tech companies trading in Hong Kong. 

Alibaba Group, Tencent Holdings, Xiaomi Corp., and SMIC led the gainers in Hong Kong for the second week in a row amid persistent buying by mainland investors. 

Mainland institutional investors increased exposure to tech stocks trading in Hong Kong in the hopes that the affordable access to artificial intelligence will improve earnings growth in the near term.

Individual investors increased their exposure to stocks denominated in Hong Kong dollars amid worries of yuan devaluation.

Mainland-China-based funds purchased a total of HK $1.38 billion worth of stocks on Stock Connect through February 11, according to the latest data available from exchanges. 

China-based funds invested a total of HK $807.9 billion in 2024 in Hong Kong stock, a record high since the launch of the cross-border investing link in 2014. 

Wall Street indexes wavered around the flatline after Fed Chair Powell confirmed that inflation is slowing but remains above the long-term target rate. 

Market participants were cautiously optimistic after Chairman Powell confirmed that the U.S. economy is on solid footing and the labor market remains strong, and the central bank is in no hurry to lower rates in the near future. 

However, on Wall Street, benchmark indexes struggled to advance amid growing fears of a wider trade war sparked by the chaotic Trump administration and fears of resurgent inflation. 

Higher interest rates in the U.S. will keep rates higher in Hong Kong because of the currency's linked status with the U.S. dollar, which could negatively impact the housing market. 

 

China Indexes and Stocks

The Hang Seng index jumped 1.9% to 21,697.58, and the mainland-focused CSI 300 Index advanced 0.2% to 3,890.54. 

Alibaba Group Holding surged 7.4% to HK $112.60, Tencent Holdings Ltd. advanced 2.7% to HK $438.80, SMIC gained 4.5% to HK $47.30, and Xiaomi Corp. added 3.3% to HK $43.95.

Guming Holdings was nearly unchanged after the bubble tea maker listed its stock on the Hong Kong Exchange. 

Guming traded at HK $9.32 after the company sold 182 million shares priced at HK $9.94 per share and raised HK $1.72 billion or $220 million. 

The company operates 9,778 premium-tea stores in smaller cities in China. 

CATL Co. Ltd. increased 1.8% to ¥255.30 after the battery maker for electric vehicle filed to list its stock on the Hong Kong Exchange.