Stock Markets Hesitant Ahead Of Inflation Data, Earnings

Global stock markets drifted on Wednesday, the eve of the release of key US inflation data and the start of the latest earnings season.

Global equities have largely weakened since the beginning of the year, as investors grow concerned that they may have been too hasty at the end of 2023 in pricing in a series of US interest rate cuts for this year.

The Federal Reserve signaled at its December meeting that it saw three reductions in 2024, while analysts had forecast double the amount.

The release last week of minutes from that meeting, and a forecast-beating US jobs report, forced dealers to scale back rate-cut expectations even as inflation comes down.

Traders ended last year optimistic that the Fed would start to cut rates in March, but some do not now see that happening until June.

Analysts said US consumer price index data, to be published on Thursday, will be crucial to the markets' near-term performance.

The coming release of annual earnings from some of the biggest companies will also show the impact of higher interest rates on performance.

"Attention gradually shifts to the upcoming earnings season to gain insights into companies' growth trajectories," said Stephen Innes of SPI Asset Management.

In the United States, mega-cap technology firms "are under close scrutiny due to their significant influence and substantial weight in the S&P 500", he added.

Wall Street's main stock indices climbed Wednesday.

"With little in the way of economic data, and ahead of key inflation numbers and the start of the fourth quarter earnings season, the path of least resistance for US stock indices appears to be 'up'," said Trade Nation analyst David Morrison.

Elsewhere, bitcoin was lower after volatile trading on Tuesday when an unauthorized message posted to the US Securities and Exchange Commission's official X account said it approved wider trading of the world's biggest cryptocurrency.

The message sent bitcoin to a 22-month high near $48,000 but it sank after SEC chair Gary Gensler took to his own X account to warn that the regulator's main account had been "compromised."

The cryptocurrency was sitting around $45,500 late Wednesday, relatively unchanged after US securities regulators gave the green light to a group of bitcoin exchange-traded funds. The move, announced after markets closed, is expected to boost the cryptocurrency.

Meanwhile, most Asian stock markets retreated on Wednesday.

Tokyo, however, extended gains and hit a fresh 34-year high, boosted by a slowdown in wage growth. That, along with the Fed rate outlook, weighed on the yen.

"With the market's expectation of an early Fed rate cut receding after the start of the new year, Japanese stocks remained firm on the back of expectations that the yen's depreciation against the dollar will support corporate earnings," said JPMorgan's Rie Nishihara.

Eurozone stocks ended the day flat.

Trade Nation's Morrison said there was no clear direction in trading.

"Perhaps this is understandable given the lack of significant economic data so far this week, and uncertainty over the pace and timings of central bank rate cuts this year," he said.

London's blue-chip FTSE 100 index shed 0.4 percent, as supermarkets pulled down the index due to worries about weak sales of clothing and merchandise.

New York - Dow: UP 0.5 percent at 37,695.73 (close)

New York - S&P 500: UP 0.6 percent at 4,783.45 (close)

New York - Nasdaq: UP 0.8 percent at 14,969.65 (close)

London - FTSE 100: DOWN 0.4 percent at 7,651.76 (close)

Paris - CAC 40: FLAT at 7,426.08 (close)

Frankfurt - DAX: FLAT at 16,689.81 (close)

EURO STOXX 50: FLAT at 4,468.98 (close)

Tokyo - Nikkei 225: UP 2.0 percent at 34,441.72 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 16,097.28 (close)

Shanghai - Composite: DOWN 0.5 percent at 2,877.70 (close)

Dollar/yen: UP at 145.77 yen from 144.48 yen on Tuesday

Euro/dollar: UP at $1.0976 from $1.0950

Pound/dollar: DOWN at $1.2742 from $1.2748

West Texas Intermediate: DOWN 1.2 percent at $71.37 per barrel

Brent North Sea Crude: DOWN 1.0 percent at $76.80 per barrel