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Indices Higher Despite CPI Report

STOCK INDEX FUTURES

Stock index futures are higher as bond yields slipped back.

Mortgage applications in the U.S. increased 1.4% in the first week of January, while applications to refinance a mortgage edged down 0.1%, according to data from the Mortgage Bankers Association.

The December consumer price index was up 0.5% when a 0.4% increase was expected. On an annualized basis the consumer price index was up 7.0%, which is the highest level since 1982.

The Atlanta Federal Reserve’s Business Inflation Expectations survey for January will be released at 9:00 central time. Last month the survey showed 3.4%.

At 1:00 the Federal Reserve will release its “Beige Book” on the economy. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.

The producer price index, which measures wholesale prices, will be reported on Thursday.

Later this week, fourth-quarter earnings season kicks off with major U.S. financial firms reporting results.

Stock index futures are higher despite the mildly bearish consumer price index report, which is an indication that there will be follow-through gains today for futures.

The longer-term fundamentals remain supportive despite the more hawkish Federal Reserve.

CURRENCY FUTURES

The British pound advanced to a nine-week high against the U.S dollar.

A hawkish Bank of England will likely continue to support the British pound. The Bank of England surprised traders in December by hiking interest rates from record low levels. The central bank will probably increase interest rates again as early as next month. Financial futures markets have priced in up to four Bank of England interest rate hikes in 2022.

Bank lending in Japan in December increased 0.5% year-on-year.

An accommodative Bank of Japan will likely result in long-term pressure on the yen.

INTEREST RATE MARKET FUTURES   

The Treasury will auction 10-year notes today.

Neel Kashkari of the Federal Reserve will speak at 12:00.

The World Bank reduced its 2022 global growth forecast in its semi-annual Global Economic Prospects report on Tuesday. Global growth will slow to 4.1% this year from 5.5% in 2021 and 3.2% growth in 2023.

Some analysts believe that if the rate of growth in the U.S. economy slows, it may be difficult for the Federal Reserve to maintain its recently ramped-up hawkish policy stance.

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